Venezuelan President Hugh Chavez has suspended the nation’s program offering free oil to American citizens.

Through the Venezuelan-owned Citgo, indigent Americans have received over $100 million of free oil and gas. Chavez had used the gesture of generosity in an effort to humiliate George Bush and score a propaganda victory for his leftist government.

But at the price of oil slumps from a record $147 in July to around $40 now [Venezuelan crude sells for less than that at a price of $30 a barrel given its heavier texture], the Venezuelan government is faced with declining revenues and cannot afford to be as generous as before. According to consultancy firm Latin Source, the government loses $5 billion [or 1.4% of GDP] for every $10 drop in the price of oil. And Venezuela is incredibly dependent on oil for state revenues, 50%, and exports, 92%.

In light of these new circumstances, the nation is ending its American free oil program. Joseph P. Kennedy II, son of Robert F. Kennedy, announced that the distributor Citizens Energy Corporation was suspending operations. He added that he would attempt to change Chavez’s mind.

Chavez’s success both at home and abroad has been one of financing support through an increase in state services and free oil overseas. Venezuela currently provides a total 300,000 barrels of oil per day to more than a dozen Central American and Caribbean nations.

Is the cutting of U.S. oil a bad omen?

Could a cut in oil to Latin Americans be next? Or a cut in spending for “21st-century socialism”?

One thing is certain, he the Venezuelan government starts running low on reserves and the price of oil stays stagnant, Chavez will come under a strong humbling. He might survive in office, but the bombastic rhetoric will probably cease. It has already.