Queensland senator Barnaby Joyce and South Australian Independent Nick Xenophon will introduce a Bill next month that outlaws geographic price discrimination - whereby big oil companies undersell petrol to drive out independents.
Senator Joyce said he would explain the plan to his party room within the next few weeks and hinted he would cross the floor if Opposition Leader Malcolm Turnbull refused to give his support.
But the initiative will also have to be supported in the Lower House by Prime Minister Kevin Rudd, who in opposition raised public expectations of government intervention in the retail fuel market.
Senator Joyce said the Bill would stop big oil companies and retail chains from charging more for petrol in nearby areas with few independents.
"There is no protection against geographic price discrimination," Senator Joyce said. "I'm going to work my backside of to explain it to people."
Caloundra on the Sunshine Coast generally has the cheapest petrol in Queensland and peak motoring body the RACQ believes this is because it has a large number of independents.
Senator Xenophon said independents did not want a special deal, just a fair deal.
"The independents are being driven out of the market and they need to be protected from Coles and Woolworths and the big oil companies," he said.
"If we allow the big supermarkets and petrol chains to buy out the independent operators they will be able to charge whatever they like for petrol because there will be no competition."
The legislation is loosely based on a Canadian model and is being drafted by Frank Zumbo, an expert in competition and fair trading law at the School of Business Law and Taxation at the University of NSW.
The Bill works in two ways.
It stops oil companies and the big chains from underselling petrol in areas with several independents, plus stops them recouping profit losses by charging more in nearby areas with fewer independents.
It will also increase the strength of unconscionable conduct laws under the Trade Practices Act to stop price "bullying".
Associate Professor Zumbo said some independents could not buy petrol for what big chains sold it for because the major oil companies dominated the wholesale market.
He said transport costs were the same for nearby metropolitan areas.
"Typically the branded and no-name independents cannot buy at a competitive price," Professor Zumbo said.
"There's a lack of transparency at the wholesale level, dominated by the big oil companies (and) there's no genuine competitiveness at the wholesale level."
Ken Parker, who manages the Boomerang service station in East Brisbane, said he would welcome the chance to buy cheaper fuel because independents could not compete with present price fluctuations.
"They start to drop the price of fuel from Wednesday night, and by early next week I can't buy it for the price they're selling for," he said.
"Basically there's no profit in fuel at the end of the month."
Mr Parker said it was important to keep locally owned independents as a part of the community.
"It is a little hard to survive out there, and it's hard to say to the general public that we can't match their pricing on a Tuesday or Wednesday," he said.
"When they're selling at $1.04, and I'm selling at $1.08 – I can't go below cost, I'd just be losing money."
East Brisbane local and longtime Boomerang service station customer Alan Ray said it was about time independents were given fair access to fuel. "I've been coming here for 18 years," Mr Ray said. "I come here because he's independent.
"It's a local business and we should keep them going."
Last month Senators Joyce and Xenophon spent an hour pumping fuel at an independent Sydney station that was selling unleaded for 49.9¢ a litre to highlight the challenges of small retailers.
Senator Joyce said he wanted to sell the Bill to his party room, introduce it into the Upper House and then refer it to committee.