Europe's fuel prices falling

Fuel consumers in Europe will benefit from falling pump prices

By CNN's Tom Bogdanovicz

LONDON, England (CNN) -- As the oil cartel OPEC considers its response to falling oil prices, fuel retailers are already responding with lower pump prices.

If oil prices remain at recent lows, OPEC members will lose out. But for Europe's consumers, oil at less than $22 a barrel is already bringing benefits.

Pump prices, which are more than a dollar a litre in some European countries, are falling.

BP, the oil major, cut its price tag by 1.5 cents a litre in the UK Tuesday night, along with supermarket Tesco. Others are expected to follow suit -- one bright light amid signs of economic gloom.

"Obviously lower oil prices do help, it acts as a tax cut for the consumers, and it acts like a benefits margin for the producer because obviously energy costs are a very important part of expenditure," says Mark Tinker of Commerzbank.

Fuel retailers can afford to drop their charges becasue the wholesale price of gasoline has dropped sharply in recent days. In Rotterdam, a key market, gasoline prices have fallen some 10 percent since Friday.

Behind the fall is a significant buildup in gasoline stocks. In the United States, spare supplies rose by 8.7 million barrels last week.

There is evidence that people are staying home and watching videos instead of making trips by car. And what happens in the U.S. market affects prices worldwide.

"The reason why we watch the U.S. so carefully is it is by far the biggest energy consumer in the world. If demand falters there, it has ramifications for the rest of the world but is also a good indicator that the rest of the world may follow soon," says Axel Busch of Energy Intelligence.

In the past two years, OPEC has had the upper hand in keeping oil prices high. But reduced air travel and slowing economies are reducing demand for oil.

Consumers had to bear the cost as oil prices rose above $30 a barrel last winter. Now OPEC is under pressure, and it is consumers who may gain.