Expert View: The joke's on Bush as Chavez strikes it even luckier

Estimated oil reserves have just overtaken those of Saudi Arabia

There is nowhere on this earth quite like Caracas. Certainly the business traveller has no shortage of time to admire the physical beauty of its setting - two-hour traffic jams characterise this oil-boom city, where petrol costs a mere tuppence a litre. We'd better get used to it. For Venezuela has just overtaken Saudi Arabia in its estimated oil reserves to become number one in the world. Venezuela is here to stay.

When the reports of the country's latest good fortune came through to New York, a banker turned to me and said: "Surely by now George Bush must realise God is not on his side." Even under the old estimates, Venezuela already had its place as a major oil producer guaranteed for the next 80 years. Now it would appear to stretch into infinity. Together with the Middle East, Caracas will be the major force in world energy markets.

In Venezuela itself, high oil prices are having dramatic effects. The Dallas-like skyline is testament to an economy that grew by an astonishing 18 per cent in 2004 and nearly 10 per cent last year. Oil now accounts for well over 80 per cent of exports and more than 50 per cent of government revenues.

And the important point about these enormous revenues is that they are in the hands of President Hugo Chavez, sworn enemy of President Bush. Chavez's Fifth Republic Movement has a powerful majority in Parliament and he looks set to be re-elected for another six years in the presidential elections later this year.

At home, Chavez is fostering his "21st-century socialism", an interesting blend of state control and capitalism, which sees the state establishing its own companies to outdo the private sector. This is combined with strict controls on prices, bank lending and foreign exchange.

Chavez has delivered tangible benefits to the many millions of peasants who make up the bulk of Venezuela's population. Food handouts and free medicine are the order of the day, ensuring that Chavez's weekly TV show, Hello, Mr President, has mass appeal. It lasted six hours the Sunday I was there.

Abroad, Chavez is a thorn in the side of Bush. He has become a figurehead for all those Latin American countries tired of American arrogance, taking over where Fidel Castro left off in what Chavez calls the "axis of good". Venezuela is using its oil revenues for a variety of social programmes across the continent, spending an estimated $2bn (£1.1bn) in neighbouring countries alone. It has even rubbed George's nose in it by providing the poor of Boston with free winter fuel.

The scope for a US response is limited. While the wilder fanatics in Washington play with military schemes and give encouragement to secessionists in the nest of Venezuela, the reality is they will have to keep their fire well away from this tinder box. For Venezuela is America's number-one oil supplier, providing more than $100m worth each day. That's the joke - it's American money financing all this anti-Americanism.

This situation spilled over into an attack on the US ambassador's car last week. The crime rate in Caracas is high, with kidnapping a threat for all. While I was there, a case involving the brutal murder of three young Canadian brothers captured the city's hearts, leading to mass demonstrations. One US resident told me a terrifying story of being chased in a BMW (far too smart for Caracas) by two attackers on motorbikes with sawn-off shotguns.

Venezuela is a unique country, its political system the opposite of Bush's America, and its social dynamic the most intense version of what is going on across the continent today. But the reality of its energy windfall means that Americans and Europeans must get used to it and seek to understand. The wild card is very much part of the pack.

Christopher.walker@tiscali.co.uk