While the currencies of net oil exporters appreciate against the dollar only when crude oil futures rise, the “greenback” benefits from both high and low prices.
This is primarily due to the unique role of the dollar as a global reserve currency, the vast production capacity of the U.S. in oil extraction, and the increase in consumer spending driven by lower gasoline prices.
High oil prices support the dollar because oil is traded in dollars. When oil prices rise, it also hurts other major economies that import significant amounts of “black gold,” such as Japan or Europe. Oil price shocks, which are sometimes associated with wars, further highlight the role of the U.S. currency as a safe-haven asset.
At the same time, falling crude oil prices are also good news for the U.S. economy and the dollar, as they stimulate consumer spending. Therefore, in the end, the “greenback” seems invincible during oil price shocks.
As for the currencies of other major oil producers, a regression analysis of their relationship with crude oil futures shows that the Norwegian krone, Colombian peso, and Mexican peso experience the biggest gains when prices rise. A 1% increase in crude oil futures makes these currencies 0.09–0.11% stronger against the dollar, as shown in the orange bars on the graph below.
Oil producers who are net importers of crude oil and refined products, such as the UK and Australia, see their currencies depreciate when oil becomes more expensive, as shown in the gray bars. Mexico is the only country that benefits from high oil prices, despite being a net oil importer, according to the government’s statistical agency. This is due to the country’s significant reliance on oil export revenues to its powerful northern neighbor.

The bigger question for the future of the dollar is whether the persistent excessive dependence of American consumers on oil – such as the miles driven in the U.S. compared to Japan or Europe – can offset future benefits to the dollar if oil prices rise again. Before the U.S. began exporting oil, high crude oil prices caused significant damage to the country’s economy, such as during the oil crisis of the 1970s.
It can be said that the U.S. economy is in a much better position to handle oil price shocks now, thanks to its vast domestic oil production capabilities, large oil reserves, and higher fuel efficiency standards. While American consumers are unhappy with higher gasoline prices, spending and economic activity proved very resilient in 2021 and 2022 despite the rising fuel costs.
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