George Osborne today decided to scrap the 3p-a-litre fuel duty increase planned for January 2013.
The planned hike would have meant drivers filling an average tank would have had to spend almost £2 more for petrol or diesel.
The move was immediately welcomed by AA president Edmund King.
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He said: "This decision avoids a new year's headache and a long hangover for all drivers and is very much welcomed by the AA.
"Big Ben's chimes ringing in a nearly £2-a-tank hike in petrol and diesel prices would have back fired on the Government and economy."
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The Chancellor said he was not merely postponing the 3p rise until April 2013 but axing it altogether.
He said it would help families and businesses across the country.
"The Treasury may have thought that a fuel duty increase in the winter, when petrol is usually cheaper, would have been easier. But, toasting the new year with Champagne at a lower duty rate than road fuel underlines successive governments' failure to spot the difference between a luxury and a necessity," King said.
"In 20 years, UK motoring has cut its fuel consumption by 20% (12.8 billion litres), but contributes 144% more (£15.81 billion) in fuel duty tax.
"In the last financial year, the Treasury collected its second highest-ever haul of fuel duty from UK drivers - a whopping £26.8 billion.
"That is two and a half times more than what is spent on UK roads (£9.8 billion), even before receipts from Vehicle Excise Duty, VAT, company car tax and new car tax are added."