Because production quotas are determined by proven oil reserves, and reserves are a function of market price, Venezuela has a lot to gain if OPEC recognizes $50 per barrel as the long-term price of oil. The country's Orinoco tar sands deposit is an ultra-heavy oil formation, not unlike Canada's oil sands. Including all of Orinoco, the U.S. Department of Energy estimates Venezuelan reserves at 1.3 trillion barrels -- more than all other OPEC nations combined. Venezuela claims that at $50 per barrel, a portion of the Orinoco tar sands becomes commercially viable, enough to bring the country's proven reserves up to 312 billion barrels.

The other members of OPEC are unlikely to welcome this development, but it will not be easy for them to simply reject the proposal. In 2004, OPEC nations were all essentially pumping at full capacity. Furthermore, OPEC member Indonesia has become a net oil importer and is considering dropping out of the cartel.

(The Guardian and Forbes also have good coverage.)

Needless to say, these developments are not welcome in Washington, D.C., where the Bush administration has funded Chavez's opponents and said it would welcome a coup. Chavez warned that if the U.S. tried to invade, it would result in a long, grinding guerilla war and the end of oil production. "U.S. soldiers will bite the dust and so will we, Venezuelans."

We live in interesting times.