Venezuela's proven oil reserves currently are estimated at about 77.2 billion barrels, but if undeveloped deposits of extra-heavy crude are factored in, the number would jump to 270 billion barrels. That alone would vault Venezuela past Saudi Arabia, which has 262 billion barrels in reserves, but Oil Minister Rafael Ramirez told The Guardian that the government wants OPEC to recognize the country's total reserves as close to 312 billion barrels.

In bringing up long-term contracts, Chavez said the era of "cheap" oil has ended and that $50 per barrel -- about $15 below current market prices -- is reasonable.

While the proposals themselves are interesting, the more intriguing question is what exactly Chavez hopes to accomplish in putting them forward.

Numbers tell some part of the story: While Venezuela is home to the largest proven oil reserves in the Western Hemisphere, most of its oil consists of extra-heavy crude that is too expensive to pump out and refine -- unless market prices are at least $40 per barrel. In asking OPEC to set a reference price of $50 and attempting to lock in all its sales at that price, Venezuela is seeking a way to have its extra-heavy deposits counted as reserves by the market, since that oil could then be accessed and exploited. And if the country's "total" reserves are officially increased, its oil production quota as determined by OPEC would increase significantly as well.

But, what sense does any of this make? Apart from attaining the bragging rights of having "the world's largest oil deposits," there is not much intrinsic value in having Venezuela's extra-heavy deposits counted by the market. After all, if Chavez really wants to increase Venezuela's outputs, there is little to stop him from exceeding the current production caps set by OPEC quotas -- many other countries have flouted quotas before (though Venezuela, under Chavez, has not been one of them). Moreover, it is believed that Venezuela has not returned to full capacity since a strike at state-owned Petroleos de Venezuela -- which began in December 2002 and continued for weeks -- seriously affected production.

In attempting to fix a long-term price for Venezuelan oil, it would appear that Chavez hopes to secure a stable flow of revenues. That's fine so far as it goes, but considering that market prices are currently above $50 per barrel, the cost of doing this, for Venezuela, would be considerable. Additionally, at that price point, Chavez would in essence be subsidizing the countries that signed on for such a contract. And that does not add up, especially when the Venezuelan government needs more funds to pay for decaying infrastructure and to finance the dozens of projects and promises of aid that Chavez has offered in other parts of Latin America. Without more details, it is difficult to do more than speculate on what the Venezuelan president has in mind.

That said, there is a possibility that he wants to entice some countries -- perhaps a major purchaser like China, for example -- to agree to buy Venezuelan oil for several decades at $50 per barrel. But in order to work to Venezuela's advantage, such a contract likely would require purchasers to pay a considerable sum up front and invest in the development of the extra-heavy oil fields. It is very unlikely that anyone would agree to such a deal -- particularly considering that Chavez has a history of breaching contracts -- unless the purchasers never intended to abide by the terms themselves either.

International trust in Chavez has declined over time -- in no small part as a result of the government's campaign of expropriations, targeting foreign-owned companies and assets. In the latest example, Caracas ordered the takeover last weekend of two oil fields belonging to French company Total and Italy's ENI, which together produce about 100,000 barrels per day. The Chavez government has been renegotiating the terms under which foreign companies can operate in Venezuela, but Total and ENI -- like ExxonMobil before them -- did not accede to demands that would force them into joint ventures with the government (and in which Caracas would have the majority share).

As it stands, the only clear incentive a country might have to participate in Chavez's $50-per-barrel plan would seem to be arbitrage: Taking shipment from Venezuela and then reselling that oil at market prices, for a profit. Of course, if anyone did that, Chavez would be justified in reneging on his part of the deal. And if both parties have incentive to breach, the deal would be a nonstarter under any circumstances. Or, viewed from another angle, even if Chavez finds many countries willing to sign such a contract, Venezuela likely would not be able to increase its oil output fast enough to meet demands. Then again, if he wants to lock in long-term contracts for Venezuela's oil in order to cut off supplies to the United States, the other buyers still would have plenty of incentive to turn around and sell supplies to Washington themselves (arbitrage again).

So, Chavez's proposal appears to amount to very little. It is not the first exotic proposal he has pitched in recent memory, and like others -- such as the proposal for a South American pipeline -- it makes little sense economically. And while leaders of some countries might be drawn to Chavez's offer of cheap oil -- and even sympathize or identify with anti-American rhetoric -- they will look closely at his record when it comes time to do business.