Service stations deliberately price gouging customers due to the Middle East war will face harsher penalties, as the federal government acknowledges panic buying has led to shortages in regional areas.
Treasurer Jim Chalmers said penalties would be doubled to $100 million maximums for service stations found to carry out false or misleading conduct and cartel behaviour.
The consumer watchdog has also been tasked with increasing fuel price monitoring following the Middle East conflict, with an emphasis on irregular price spikes.
The treasurer said disruption in the oil market was causing issues.
"We're not immune from uncertainty and volatility in the global economy, but these measures are about ensuring petrol suppliers are doing the right thing and ensuring the minority of bad actors can't hurt regional Australians or farmers," Dr Chalmers said.
"We are not experiencing a fuel shortage but rather localised disruption due to significant spikes in demand. Despite global price volatility – Australia's fuel supply remains secure."
The Australian Competition and Consumer Commission said it would meet with major players in Australia for an explanation on price spikes.
"We are closely watching market behaviour and if there is conduct that is collusive or misleading or deceptive, we will investigate it and take action where appropriate," commissioner Anna Brakey said.
"We are aware of concerning reports about diesel availability in regional and rural Australia. We know how critical diesel supply is to primary producers, transport businesses and many others, so we are prioritising our work to assist with this."
Energy Minister Chris Bowen said regional areas were experiencing shortages in fuel due to rising demand, rather than supply issues.
He said panic buying was contributing to the issue.
"We recognise fully that in regional areas in particular, there are shortages in particular areas, and that the supply chain is under huge pressure, as we have seen a massive increase in demand," he told parliament.
"The rush to buy fuel is unprecedented, outstripping the surge at the outbreak of the Russia-Ukraine war in 2022."
The minister said in some cases bulk customers were buying four times the amount of fuel they normally purchased.
The average price of unleaded petrol and diesel has risen past $2 a litre in all major cities, leading to accusations of profiteering by fuel companies.
The rise in diesel prices in the capitals, some as high as 230 cents a litre, was going to be detrimental to agriculture, mining and transport, NRMA spokesperson Peter Khoury said.
"Every corner of the economy will see prices go up," he told AAP.
"If these new record prices are sustained, that's going to have a direct impact on what we pay in the supermarket aisle and that's going to unfortunately, have a significant inflationary effect on the economy."
Mounting conflict in the Middle East has closed one of the world's most important oil corridors, the Strait of Hormuz, disrupting global shipping and putting a clamp on supply.
The motoring organisation said some parts of regional Australia were running low on diesel because of stockpiling and panic buying.
"We must go back to our normal buying habits for fuel, and oil companies have to ensure that as the tankers arrive in our terminals, that independent retailers in regional Australia are getting access to the fuel they need," Mr Khoury said.
Farmers warn the fuel situation could affect the food supply, because of difficulties obtaining diesel and fertiliser.
"Rising diesel and fertiliser costs increase the cost of producing food, and those higher costs will flow through to grocery prices for Australian households," Rural Aid chief executive John Warlters said.
"Farmers are worried about securing fertiliser in time for sowing, and with fuel shortages already emerging, there's growing concern about keeping essential farm operations running."