The "dismissive" response from Canberra service stations on calls to lower fuel prices led to the ACT government warning it would intervene in setting the cost of petrol, the ACT chief minister said.
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Andrew Barr has warned the government would step in using powers under the Fair Trading Act should retailers not lower petrol to $1 a litre by Friday.
The ultimatum was issued after Mr Barr said he had written to every petrol retailer in the ACT in the past two weeks asking them to explain why fuel prices were not lower.
"On the basis of receiving replies from the majors, we were determined to go further and issue the ultimatum," Mr Barr told ABC radio on Wednesday.
"The attitude of some of the retailers is beyond belief, given where everyone else is moving.
"There's about a handful of operators that control 70 per cent of the market and they're not doing the right thing and they're on notice."
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Mr Barr said legislation would move to set the retail margin at Canberra service stations should they not comply with the order to lower prices voluntarily.
Failure to comply with the order to lower margins should the legislation be enacted would lead to fines of $40,000, six months in jail, or both.
While independent service stations have lowered prices to below $1 a litre, some as low as 88c, major petrol stations have set the price of unleaded at more than $1.15 in some instances.
"I accept that the wholesale price of petrol will fluctuate and it has dropped dramatically," Mr Barr said.
"Across Australia we have seen reduction in fuel price but in the ACT it's nowhere near enough.
"We know we're being gouged and it has got to stop."
Petrol prices across the country have fallen to some of their lowest levels in more than 20 years due to the global coronavirus crisis.
The Australian Competition and Consumer Commission has recently warned petrol retailers that they should not use the pandemic to increase profits and it would continue to monitor prices.
A bipartisan ACT inquiry was set up last year to look into ways of passing on lower petrol prices to Canberra drivers.
"The issue has been around for a while, but this is among the most egregious example," Mr Barr said.
"This measure does sit as a last resort."
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Mr Barr said the legislation allowed for the government to set the retail margins periodically for "short periods of time" and could go for three or even six months.
"If we're going to see negligence and retailers are not going to do the right thing, we may need to go for longer," he said.