Holidaymakers will see fuel prices falling by up to 12% for unleaded petrol and 31% for diesel.

The report says Eurozone countries such as Austria and Spain are better value overall because drivers can expect to pay just 1p more for unleaded petrol but much less for diesel.

The UK is the only country where diesel costs more than petrol making it the second most expensive European country after Norway.

Sarah Munro, the Post Office head of travel, said: "This year's report shows more evidence of price cutting activity to boost tourism in popular European summer holiday resorts.

"The huge drop in car hire costs in both Portugal and Greece is great news for UK tourists and is another factor that should be taken into consideration when choosing a holiday this year.

"However we found little consistency in the charges made for one, three and seven days' car hire.

"The clear message to consumers is to shop around and not to assume that a car hire company used in the past will still offer the best value."

However, would British holidaymakers change their summer plans as a result of changing fuel prices?

The Petrol and Fuel Survey, released in June 2009, says fewer than half of those questioned have changed their holiday plans or even cut back on driving because of rising fuel prices.

However, nearly 60% of drivers say they would go out of their way to find cheap petrol in Britain.

Almost half of the people surveyed believe the government is to blame for rising fuel prices, with a further 22% blaming the oil companies.

The UK's duty on fuel for 2009 is still expected to rise as the chancellor has imposed a 2p per litre rise from 1 September.

The budget report describes fuel duty as a key tool in reducing carbon dioxide emissions, because it encourages people to drive less.