The territory government announced the inquiry on Sunday, after a campaign from the Sunday Canberra Times about the discrepancies in fuel prices in Canberra when compared to towns in south-eastern NSW.

But Mr Barr said he would also not rule out setting a maximum price or retail margin for service stations, off the back of a parallel Independent Competition and Regulatory Commission probe into the factors fuelling petrol prices.

"What we are seeking to do here is to hold to account those who are gouging Canberra motorists to get some factual information in relation to retail price margins that may inform a more dramatic government intervention in the future," Mr Barr said.

Mr Barr said an intervention may be necessary as price watch schemes "may have some impact but they’re not going to provide a 20 cents per litre reduction in fuel prices".

"The schemes already exist, people know where the cheap fuel is in Canberra, we do need to recognise those schemes have limited effect," Mr Barr said.

“It may well be that the only way to get a territory-wide reduction in the outrageous fuel prices is for a direct government intervention to set a maximum retail margin in this territory but before taking such dramatic action it is important that this Assembly committee undertake that work and that the ICRC provide that information to the government."

Consumer affairs minister Shane Rattenbury said the legislative power had not been used since its introduction 26 years ago, and he did not believe any other Australian government had staged such an intervention.

However, the government would not use the power lightly.

"If we were to step in and start to regulate retail margins we’d have to have a really thorough understanding how the market operated, how those retail margins were determined in order to then make a determination on what they could or should be," Mr Rattenbury said.

To critics of a government intervention in a market, Liberal leader Alistair Coe said petrol was "so heavily regulated and so restricted that it's barely a market".

"You can't just open up a new petrol station easily. You can’t just bringing in new petrol into the country or new oil into the country easily," Mr Coe said.

"The restrictions on new operators means that this is not a market that is operating well and it’s certainly not a market that’s operating freely so to critics who say this is an unreasonable market interference I think it requires a far more detailed analysis than just those glib lines."

Mr Barr also said the Legislative Assembly inquiry would have the power to get retailers and wholesalers in the witness chair to explain why their prices differ so markedly from petrol stations across the border.

Labor's Tara Cheyne and Liberals Mark Parton and Andrew Wall will be on the fuel prices committee, and Mr Barr urged them to "demand answers" and "not be afraid to pursue" retailers over the discrepancies.

"Throughout the public debate about fuel prices in our city, the voices of these large retailers have been in the past have been absent and continue to be absent so I think it’s time for these powerful companies to come forward into the public arena and to justify their fuel prices," Mr Barr said.

"I think there is a benefit in shining a light upon the practices of certain retailers in this city and making them publicly account for the gouging they are undertaking on Canberra motorists."

He also said he hoped the pressure from the dual reviews would force retailers to lower prices over the next six months.

Australian Competition and Consumer Commission chairman, Rod Sims this week blamed the market dominance of Coles for Canberra's high prices, with over a quarter of outlets owned by the supermarket giant.

However Coles signalled prices could soon fall due to a new deal with their fuel supplier.

The inquiry comes as the ACT parliament passed new laws banning service stations from displaying discounted fuel prices on Thursday.

As it stands, some stations show prices only available to drivers with discount coupons or loyalty cards and the true cost of fuel is higher.

Service stations would have six months to comply with the new rules.