Chavez has been lucky ... but will it allow him to win the 2012 elections?

The Miami Herald (Andres Oppenheimer): After two years of gradually losing popular support at home and political influence abroad, Venezuelan President Hugo Chavez could be one of the big winners of a major rise in world oil prices triggered by the Egyptian uprising.

But will oil prices rise enough to give Chavez' 12-year-old regime a second wind, and allow him to win the 2012 elections? Will he be able to resume his checkbook diplomacy in Latin America?

Venezuela's narcissist leader -- if you think this depiction is unfair, consider that in his January 15 speech to Congress he used the word "I" 489 times -- knows that his political future depends on oil prices.

His popularity at home is dwindling -- 52% of the vote in last year's legislative elections went to opposition candidates, despite massive government propaganda and limited press freedoms -- and Venezuela suffers from a 30% inflation rate, growing food shortages and the lowest economic growth rate in Latin America.

But Chavez is betting that the "Egypt effect" on oil prices will save him. Since late January, when the Middle Eastern turmoil started, New York-traded oil prices have gone up by about $7 a barrel, and surpassed the $92 a barrel mark earlier this week.

Venezuela says it exports about 2.3 million barrels of oil a day, and economists calculate that -- after subtracting subsidized oil sales to Cuba and other countries -- each $1 rise in world oil prices will give the Chavez regime an extra $730 million a year.

Some financial analysts say that, just by staying where they are, oil prices would give Chavez a major financial boost. "This will definitely help him," says Russ Dallen, head trader with the Caracas, Venezuela-based BBO Financial Services firm. "The government was betting that prices of oil would go back up, and it was a good bet."

According to Dallen, if Egypt manages to carry out a peaceful transition of power and oil prices stay at about $92 a barrel, Venezuela would get an additional $5.1 billion this year from oil exports.

If Egypt's transition is chaotic, and fears over the passage of oil tankers through the Suez Canal drive New York-traded oil prices to $100 a barrel, Venezuela would get an extra $10 billion this year, he said.

And if the Egyptian turmoil extended to major Middle Eastern oil producers and oil prices reached their previous record of $150 a barrel, Venezuela would get an additional $35 billion a year. But that's unlikely to happen because such an increase would immediately trigger a major world recession that would immediately drive down world oil prices, he said.

Other analysts say Chavez won't benefit from the "Egypt effect," among other things, because Venezuela has to pay massive foreign debts, and its oil production is falling dramatically.

Evanan Romero, an energy consultant and former director of Venezuela's PDVSA oil monopoly, told me that lack of investments in exploration and maintenance have driven down Venezuela's oil production by more than a third over the past 12 years, and that oil exports will keep falling. He said that Venezuela's extra oil income will be reduced by massive domestic consumption -- Venezuelans pay less than 5 cents a gallon for gasoline -- as well as by large-scale oil smuggling to neighboring countries and Chavez' subsidized oil exports.

"Chavez' financial problems won't be solved this year by the current spike in oil prices," Romero concluded. "What he wins with rising oil prices, he loses with declining oil production."

My opinion: Chavez has been a lucky guy, and record oil prices during the past twelve years have allowed him to buy loyalties at home and abroad. The current rise in world oil prices will no doubt help him, but it won't be enough to allow him to give away cash to voters like in the past.

If oil prices rise above $110 per barrel, the U.S. economic recovery will come to an end, oil prices will drop, and Venezuela's export income will fall. So we can assume Chavez will get a small respite from the "Egypt effect," but nothing that would allow him to easily win next year's elections without further tightening his grip on power, or rigging the vote.