To better understand the link and relationship between exchange rate and retail oil prices, this paper has studied the effect of exchange rate on oil price (Petrol, Diesel) in Oil retail service stations in Ireland.
In this paper, we investigate the long-run relationship between oil price (Petrol, Diesel) and exchanges rates by using monthly average observations on Irish retail oil prices and Euro US Dollar Exchange Rates from January 2005 to June 2015. We first test whether or not exchange rates and oil prices are co-integrated. Stationary and co-integration tests have shown that real Exchange rate may have been the dominant source of retail oil Prices movements. Finally, the results shown that, there is a long-run linkage between retail oil prices and Euro US Dollar exchange rates. The result also shown that Euro US Dollar exchange rate does not appear to be the only fluctuation factor determining retail oil prices in Irish road full market.