Petrol pump prices have started to fall across Europe and are expected to drop further after Iraq accepted the return of United Nations arms inspectors this week, easing fears of war in the Middle East.
A 20 percent drop in wholesale prices on international markets in the past two weeks has only just begun to trickle down to the consumer, as oil companies have soaked up some of the extra margin.
"Gasoline has just been waiting for a collapse and it had to feed through to the pump," said Peter Regnier of London-based consultancy Oil Price Assessments Limited (OPAL). "Retail prices are destined to fall," he said.
Dutch prices dropped on Friday to four euro cents a litre lower than at the beginning of the month, while motorists in Germany and Belgium have seen a similar steady decrease this month.
French prices edged half a euro cent lower this week while UK prices are also starting to slip.
"Prices have started to fall with the superstores moving first, though the average price is still about 74 pence a litre," said Ray Holloway of the Petrol Retailers Association.
World oil prices have fallen sharply since Iraq accepted the return of U.N. weapons inspectors, because speculators on the futures markets believe it pushes back the chances of war in the oil-rich Middle East.
The market was already on a downwards swing because OPEC oil exporters have ramped up output since early October to fill storage tanks before the winter chill.
Oil firms have benefited from the move, as retail margins have improved after a lean period in September and October.
"Competitive pressures will begin to push prices down, but oil companies won't want to do that, so you could find there is a bit of a lag," said analyst Stephen Brooks of Wood Mackenzie.
In the UK margins have risen by more than one penny to over five pence a litre in the last month, although they are still only about half of the healthier profits enjoyed by Italian fuel retailers, according to OPAL figures.