Stronger U.S. dollar may push crude prices lower

NEW YORK (Reuters) - Consumers have one more reason to hope the dollar can rebound from recent lows: a stronger greenback might give them some relief from record oil prices.

The dollar exchange rate is not the only driver for oil prices, but the dollar's drop in recent months, particularly against the euro, has been almost in lock-step with a series of record highs in crude oil prices.

But the U.S. dollar has recovered some ground against major currencies in recent weeks after seeing multi-year lows in March.

While fluctuations in the U.S. dollar impact crude oil prices by affecting both supply and demand, the change in demand is the most obvious. A rising euro has made consumption of oil and other petroleum products cheaper to euro zone consumers and potentially increased demand.

With increased energy demand elsewhere, most dramatically in China and India, pushing up prices in dollars, U.S. consumers had to shoulder more of the burden. Should the dollar strengthen against other currencies, which some analysts expect given the outlook for U.S. interest rates compared with the euro zone, and push down demand elsewhere, U.S. consumers would see some price relief.

"If the dollar rallies sharply it will put downward pressure on oil prices," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. "It is dollar denominated so it costs more to other countries and they consume less."

Despite the surge in oil prices to record highs, the magnitude of the increase in the U.S. was greater than that of Europe and Japan, said Anas Alhajji, an associate professor in the College of Business Administration at Ohio Northern University .

When U.S. consumers were paying paid $110 per barrel, Europeans paid only about 72 euros per barrel, he said.

OPEC President Chakib Khelil told an Algerian newspaper last month (April 28) that he does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar's slide.