Motoring groups have welcomed an inquiry by Australia's competition watchdog into whether major fuel retailers are involved in price fixing.

The Australian Competition and Consumer Commission (ACCC) will examine private arrangements between petrol retailers which may breach the law.

It is concerned the arrangement is hammering down competition and that consumers are paying for it.

The petroleum marketing association also has given reserved support to the inquiry, but cautions against emotion and rhetoric clouding the process.

The competition watchdog will not comment on the investigation at this stage, but former chairman Allan Fels says the inquiry is well overdue.

"Each of the oil companies and major supermarkets provide full info about their prices to a business called Informed Sources, and in return they get everybody else's prices and they pay for it," he said.

"It's long been the object of suspicion as a possible unlawful arrangement to fix prices and lessen competition.

"There are arguments for and against that proposition and the ACCC is now going to dig very deeply into the subject."

NRMA spokesman Peter Khoury welcomes the inquiry.

"We don't know of any other industry where all the competitors get to go to one website and get access to what everyone else is doing in terms of a price in real terms," he said.

"What we have been saying all along is that same information should be accessible to the public."

He says the inquiry should be thorough and aim to make the system more transparent for consumers.

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"There's not nearly enough information available to the community about the pricing, about how it comes about, and about the information that's shared among the oil companies," Mr Khoury said.

"So if the ACCC is doing an investigation, they should look into all those things.

"Let's overturn every stone and make sure we can get more information about the industry, and that the information that's available to the oil companies is also available to the public."

Australasian Convenience and Petroleum Marketers Association general manager Nic Moulis fears it may turn into a witch hunt, and says the consumer watchdog should instead examine the practice of selling petrol below cost.

"Lets hope if there's an investigation run by the ACCC that it looks at the facts of these situations," Mr Moulis said.

"Competition in our industry is fierce at the best of times. If someone is deemed to have stepped too far and made that competition unfair then we would call on there to be an investigation."

Price monitor concerns

However, petroleum consultant Kevin Hughes says he is concerned the ACCC will move towards removing the price monitoring system.

He says price manipulation can be eliminated without getting rid of information sharing.

"The price monitors are being blamed for the price cycles, and that is grossly unfair when the price cycles can be stopped by the introduction of a simple regulation that says if they increase their margins by more than 2 or 3 cents in any five-day period, then that's not permitted," he said.

The ACCC has conducted inquiries into price fixing and collusion before, but Professor Fels says this investigation is different.

"It (the ACCC) has had a lot of trouble winning price-fixing cases in the courts with the oil companies, but it has generally been looking for secret collusion," he said.

"It must be said that this present arrangement has always been public, but the difference is that while it has been public, it has not really been deeply, deeply investigated.

"I think with the changed context of there being fewer players in the oil market, that it could tip the balance between it being seen as anti-competitive and illegal compared to in the past."

Ron Bowden from the Service Stations Association says it will cooperate with the investigation.

"Independent service stations fully comply with the intent and letter of the law, but we're always happy to assist the ACCC in any inquiries that they undertake," he said.