Europeans are paying less for petrol since world oil prices dropped from mid-July's record, but far wider falls in food and fuel prices are needed to restore purchasing power and morale in millions of households.

Consumers have endured a year in which the cost of oil and key commodities have roughly doubled, eating up much more of their monthly pay cheques than implied by the rise in the official eurozone headline inflation rate to around four per cent.

So while petrol price declines of five to six per cent last month following a 20 per cent drop in the price of oil are likely to mark the beginning of the end for record inflation rates, price pressures on consumers will ease only in theory, economists say.

"There's light at the end of the tunnel, but it's not shining very brightly yet," says Holger Schmieding, chief economist for the European region at Bank of America.

Italians are being urged not to buy bread on September 18 in protest at a price rise of 13 per cent in June, not to mention the 30 per cent increase in the price of pasta, a national staple. Mr Schmieding reckons the annual inflation rate in the eurozone could drop to three per cent by the end of this year and back in the European Central Bank's comfort zone of two per cent by mid next year - half the record level of July - if oil price falls stick.

That's a big 'if' given the extreme volatility of oil prices that have rallied smartly as Hurricane Gustav has swept its way towards oil platforms and refineries in the Gulf of Mexico.

That said US benchmark crude oil is around 20 per cent below the $147.27 a barrel peak hit on July 11 and spent much of the last four weeks trading around $115, in the process easing the annual rate of eurozone inflation in August to 3.8 per cent.

On the plus side, petrol prices have indeed fallen recently, according to Britain's Automobile Association (AA).

Unleaded petrol prices dipped five to six per cent between mid-July and mid-August in Britain, Germany, France and Italy.

But, even after the retreat, those prices are 10 to12 per cent higher than in August last year, calculations based on the AA price information show.

Home heating oil prices too appear to have fallen around 10 per cent in Germany and France, but French power giant EDF has raised household gas prices more than 15 per cent this year and power firms in Britain last month announced immediate rises of 15 to 30 per cent for electricity and gas.

There are other reasons for questioning the extent to which the mooted decline in official inflation figures will affect consumers.

Consumer confidence has crumbled in the EU since the pace of food and fuel price rises accelerated in the middle of last year, and morale is now way below its long-term average in monthly surveys by the European Commission.

If confidence fell then, why should it pick up now, when the economy overall is stagnating if not sliding into recession?

In addition to price pressure the housing booms of the last decade have come to an end, notably in Britain and Spain, where the traditional buoyancy of consumer demand was linked to the rising value of homes and the willingness of banks to grant credit freely on the back of that.