"The price of oil is $33, but the US dollar has declined by 40% against the euro so you're effectively getting $20," Mahathir told an economic conference in Saudi Arabia's Red Sea city of Jeddah. "So you're being short-changed."
Saudi Arabia, the world's biggest oil exporter, has justified higher world oil prices by saying they are necessary to compensate for the slide in the US currency.
Mahathir, who retired last October, spent much of his time in office upsetting Western governments and defying their economic orthodoxies. But he became a respected spokesman in Muslim and developing states and received an ovation in Jeddah.
He suggested countries tally their total annual imports and exports and settle the difference at the end of the year in "gold dinars".
Sounding a discordant note, Mahathir also warned Saudi Arabia against rushing to join the World Trade Organisation (WTO), saying it was not necessarily a positive move.
"They (the WTO) try to impose their agenda without regard for some other countries"
Former Malaysian Prime Minister
Saudi Trade Minister Hashim Yamani said on Saturday his country had narrowed differences with the United States that was holding up accession to the organisation and said he wanted to join "tomorrow".
"Everybody should be careful before joining the WTO because it is not all positive. It can be very negative if you don't handle it properly," Mahathir said. "They try to impose their
agenda without regard for some other countries."