Gaseous exchange at the alveoli is dependent on diffusion across a layer of alveolar cells,

basement membrane, the endothelial cell, the plasma and into the erythrocytes along the
concentration gradient. This gradient is very important that is maintained. Ventilation on the
alveolar side and cardiac output on the endothelial side maintain it.
Diffusion is proportional to the concentration difference, solubility and surface area. Diffusion
is inversely proportional to the membrane thickness and molecular size.
In disease, if the surface area is reduced (collapse, lung resection, severe emphysema) or
the membrane thickness increases (ARDS, Oedema, fibrosis), the concentration gradient
can be increased by an increase in the work of breathing and cardiac output, to compensate,
but it can do so up to a point, since both processes expend more energy.
Hence the solubility becomes an important issue. Since carbon dioxide is 20 times more
soluble it can be handled more efficiently than oxygen. In fact in hypoxia the patient may
hyperventilate to such an extent that the arterial partial pressure of carbon dioxide is less
than normal. This is type I respiratory failure
Normally the process of diffusion is so fast that the limiting factor for diffusion of oxygen is its
chemical reaction with Haemoglobin. In the case of CO2 it is the ventilation the rate limiting
step. If this is somewhat reduced the diffusion gradient for CO2 diminishes and the process
stalls. This is type II respiratory failure.
The Alveolar gas equation illustrates the importance of both inspired partial pressure of
oxygen and arterial partial pressure of carbon dioxide in the maintenance of a normal
alveolar partial pressure of oxygen.
pAO2 = pIO2 (paCO2 / 0.8)
In type II respiratory failure hypercapnia is associated to a varying degree of hypoxaemia
depending on the cause, especially if it is a progression from a type I respiratory failure. A
high CO2 will inevitably results to hypoxia as given by the above equation since it will take a
higher % of the total alveolar pressure. Hypercarbia also causes a shift in the oxygen
dissociation curve to the right, hence is takes up less oxygen and the oxygen gradient is
reduced affecting diffusion directly
Increasing the inspired oxygen will increase the concentration difference across the alveolar
membrane hence will improve the hypoxaemia. It will also reduce hypoxic vasoconstriction
and improve the ventilation-perfusion ratio as well (less shunt).
I hope this answers the question. A review of West Respiratory physiology explains all this.