The fiery leftist leader warned in an opening speech that crude prices could double from their current already-record level of near 100 dollars a barrel if the United States attacked Iran or Venezuela.
"If the United States was mad enough to attack Iran or aggress Venezuela again the price of a barrel of oil could reach 150 dollars or even 200 dollars," he said.
He urged assembled leaders from the Organisation of Petroleum Exporting Countries, meeting for only the third time in the cartel's 47-year history, to club together for geopolitical reasons. "The basis of all aggression is oil. It is the underlying reason," Chavez said, pointing to the war in Iraq and US threats against Iran.
"Today Opec stands strong. It is stronger than it has ever been in the past," he said. "Opec should set itself up as an active geopolitical agent." His remarks were tempered by King Abdullah of Saudi Arabia, the Opec kingpin and key US regional ally, who said that "oil is an energy for construction and must not become an instrument for conflict."
Opec's 12-strong membership is dominated by pro-Western Gulf states but includes an anti-US bloc of Iran and Venezuela. The event comes at a time of tension on world oil markets, with the cartel under pressure to increase its output to help calm record crude prices that had threatened to breach 100 dollars a barrel 10 days ago.
The talks are intended to map out the strategic direction of the Organisation of Petroleum Exporting Countries, which produces about 40 percent of world oil, but the group is divided on a number of issues.
In a gaffe late on Friday, a private meeting of Opec oil, foreign and finance ministers was mistakenly broadcast to journalists, revealing a spat between Saudi Arabia and Iran about the waning US currency.
King Abdullah also announced that Saudi Arabia was to invest 300 million dollars (200 million euros) to develop technology to tackle climate change. Chavez's idea to make Opec a more political organisation was announced previously and his plans are sure to run into opposition from the Saudi kingdom. Another leftist South American country, Ecuador, is set to seal its return to Opec at the summit after leaving the cartel in 1992.
Friday's blunder was an embarrassment for Opec and provided a rare glimpse of the inner workings of the organisation. Journalists witnessed Iran and Saudi Arabia spar over the issue of the falling dollar courtesy of a television in the media room that mistakenly had a live feed of the meeting.
The eavesdropping ended when a furious official emerged to switch off the broadcast. Saudi Arabia appeared to have prevailed in the debate about the dollar and Opec's secretary general has said the issue will not be mentioned in a final communiqué to be issued by leaders on Sunday.
The fall of the dollar, which has declined by about 15 percent in 12 months, has affected the revenues of Opec members because most of them price and sell their oil exports in the US currency. "Managing Opec politics growing forward is going to be increasingly difficult so long as antagonism between Iran and Venezuela and the US continues," said an analyst from US-based oil brokerage SIG, Yasser Elguindi. "You have the anti-US crowd and the neutral crowd."
Opec producers have a history of using their oil exports as a political weapon - they ceased exports in 1973 in protest at Israel's invasion of Syria - but nowadays Saudi Arabia likes to stress the purely economic agenda of the group.
The presence of Iranian President Mahmoud Ahmadinejad at the summit is also a delicate issue for the host country, whose leaders were reportedly infuriated when the fiery Iranian used an Islamic Conference in the Saudi city of Mecca in 2005 to deliver his Holocaust denial.
Despite pressure from consumer countries to increase supplies to help cool. Saudi Arabia announces climate change fund Saudi Arabia, the world's biggest oil producer, is to invest 300 million dollars (200 million euros) to develop technology to tackle climate change, King Abdullah announced on Saturday.
"I announce that the kingdom of Saudi Arabia is giving an amount of 300 million dollars that will be basis of a programme that will finance research related to the future of energy, environment and climate change," he said at the opening of a summit of Opec leaders in Riyadh.
Opec ministers assembled in the run-up to the summit have expressed support for carbon capture and storage, an emerging technology to trap carbon dioxide and store it underground. "Protecting the planet" is one of three headline themes of the Opec summit, a surprising focus for a group of oil producers whose wealth depends on their exports of fossil fuels.