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Kristin Forbes, a professor at MIT's Sloan School of Management and former member of the White House's Council of Economic Advisers, explains how exchange rates affect gas prices:
Oil is priced in dollars on the world market.
When the dollar is weaker, foreign currencies are stronger, by definition. That means people in other countries can buy more oil for the same amount of money.
So let's assume oil is $100 per barrel, and $100 is equal to 70 euros. If the euro appreciates against the dollar by 10 percent, then instead of 70 euros it will take only 63 euros to buy one barrel of oil.
So that oil becomes cheaper to foreigners, and they can buy more. In many countries taxes are such a big portion of the cost of oil that the savings aren't that dramatic, but it would still make sense to buy more if the price in your own currency goes down.
Another important issue is that in a lot of countries, like India, China, Indonesia, and some Arab countries, the price of oil and gasoline is subsidized, to keep the domestic price low, usually to prevent social unrest.
So in the United States it looks like the price is going up sharply, in dollars, while in other countries it's actually going up by much less or staying about the same.
http://money.usnews.com/money/blogs/flowchart/2008/03/10/why-gas-prices-rise-as-the-dollar-falls
Oil is priced in dollars on the world market.
When the dollar is weaker, foreign currencies are stronger, by definition. That means people in other countries can buy more oil for the same amount of money.
So let's assume oil is $100 per barrel, and $100 is equal to 70 euros. If the euro appreciates against the dollar by 10 percent, then instead of 70 euros it will take only 63 euros to buy one barrel of oil.
So that oil becomes cheaper to foreigners, and they can buy more. In many countries taxes are such a big portion of the cost of oil that the savings aren't that dramatic, but it would still make sense to buy more if the price in your own currency goes down.
Another important issue is that in a lot of countries, like India, China, Indonesia, and some Arab countries, the price of oil and gasoline is subsidized, to keep the domestic price low, usually to prevent social unrest.
So in the United States it looks like the price is going up sharply, in dollars, while in other countries it's actually going up by much less or staying about the same.
http://money.usnews.com/money/blogs/flowchart/2008/03/10/why-gas-prices-rise-as-the-dollar-falls