Venezuela has approved a 50-percent tax on foreign oil companies for oil when priced at more than $70 a barrel, virtually guaranteeing billions of dollars in additional annual revenue for the foreseeable future.

The new law mandates the tax on foreign oil hit 60 percent when the barrel price exceeds $100 a barrel, a rate many experts believe will not be diminished in at least the coming year.

The move, according to Oil and Energy Minister Rafael Ramirez, could generate up to $9 billion annually.

The passing of the tax increase by the Venezuelan Congress, many members of which are ardent supporters of President Hugo Chavez, is seen as a major win for the Venezuelan leader who lost a referendum earlier this year that would have granted him additional executive powers including the ability to seek a third term in office.

That, coupled with Chavez's professed augmented powers over the oil and gas industry in Venezuela, has prompted widespread speculation among Venezuela experts.

"While the government has softened its revolutionary message since last year's referendum defeat and focused on addressing day-to-day voter concerns like inflation and shortages, it has clearly not abandoned its commitment to greater state control over key sectors of the economy that are either major revenue earners or impact low-income consumers," said Patrick Esteruelas, a Latin America analyst for Eurasia Group.

Increased control of Venezuela's energy sector could not have come at a better time for the Venezuelan president.

The decision by Chavez to fund wide-ranging health and educational programs in Venezuela has forced him to implement the latest tax increase, a proposal that has been in the works for the last two months or so, said Daniel Linsker, an Americas expert at the London-based Control Risks consulting firm.

"Chavez needs to maintain this high level of spending so he needs more money," Linsker told United Press International last month, adding the new tax would likely be implemented some time ahead of November elections to curry greater favor with the poor who make up the president's support base.

But the increased tax burden could dissuade foreign oil firms from investing in Venezuela, where companies are already required to accept a minority stake in all projects, he said.

It could also further hamstring PDVSA, which according to Linsker and even some Venezuelan officials has suffered considerably from insufficient infrastructure investment, resulting in decreased production in recent years. Leading Venezuelan energy officials estimate the country is producing 3.2 million barrels per day. But OPEC estimates place output at somewhere near 2.5 million bpd, he noted.

In another troubling sign for the sector, the Venezuelan National Bank announced in January that Venezuela's oil industry shrank by more than 5 percent in 2007. Production was off 5.3 percent in 2007 from the previous year and contributed $3.14 billion to the country's gross domestic product, down from both 2006 and 2005 when the sector accounted for a reported $3.38 billion, the bank reported.

Just days after the bank's report, PDVSA officials announced that the period for which foreign companies can pay for oil was reduced from 30 days to eight.

Venezuelan officials said they decided to reduce the length of its payment period so PDVSA can, in turn, reinvest in its infrastructure sooner.