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Energy Minister Chris Bowen says fuel standards will be relaxed for 60 days to boost domestic supply.
High sulfur content fuel will be allowed to be blended into Australian supply for two months, rather than exported.
Mr Bowen says the change allows Ampol's refinery in Brisbane to supply the domestic market with a focus on regional Australia.
"This is a practical measure, 100 million litres of extra fuel each month which will be prioritised for regional Australia, with a particular emphasis on Queensland. This is action taken by the government. The opposition didn't call for this, the government has done it because it is a practical action to help farmers, to help regional Australians through this immediate crisis."
Mr Bowen also says Australia is finalising its contribution to the International Energy Agency's commitment to release 400 million barrels of oil from its reserves.
He says Australia, like all IEA member countries, has endorsed the global collective action.
His temporary relaxation of standards comes as the federal government warns fuel retailers against price gouging.
Treasurer Jim Chalmers is empowering the Australian Competition and Consumer Commission to impose fines of up to $100 million for suspicious price spikes.
He is also granting the regulator the authority to issue on-the-spot penalties to retailers.
On Seven's Sunrise, Dr Chalmers outlined a new government crackdown on retailers, involving heftier fines and intensified surveillance.
"We have announced some important new steps to crack down on any retailers who are doing the wrong thing. We have doubled the fines. We've dramatically increased the surveillance of these suspicious price spikes that people are seeing in communities around Australia. And we've also empowered the A-C-C-C to work closely with industry where there are shortages, particularly in regional areas."
Dr Chalmers says the A-C-C-C will determine the legal definition of price gouging as it monitors the fuel market.
He says the government is warning the petrol retailers not to exploit the conflict to rip off consumers.
"The message from the Albanese Labor Government is really clear to the petrol retailers. Don't take motorists for a ride. Don't treat Australians like mugs. Do not use this opportunity of what's happening in the Middle East to do the wrong thing by people. But more than convey that message to the petrol retailers, we have taken these really important steps just yesterday, not even 24 hours ago, they build on the steps that we had already taken to make sure that people are getting fuel when they need it, that the prices are fair. It's for the A-C-C-C to determine some of those legal definitions around gouging and the like. But they've certainly got the tools."
Independent M-P Monique Ryan is criticising the government's response to what she describes as predictable price gouging.
Dr Ryan says it's hurting motorists and farmers.
She is arguing that Dr Chalmers' private discussions with the industry have failed to stop the spike in costs and that the A-C-C-C needs to be far more aggressive.
"I think if you look at the people queueing for petrol at bowsers this week, what you're seeing is people's anxiety about our fuel supply and about our sovereign capacity to provide people with the energy supply that they need.... affordably."
New Nationals leader Matt Canavan is questioning the government's latest A-C-C-C crackdown, arguing that more investigations won't solve the immediate fuel shortage.
Mr Canavan is suggesting that instead of just monitoring retailers, the government needs to underwrite the risks causing foreign companies to hold back supply.
Speaking to Nine's Today show, he says the focus must shift from paperwork to the physical delivery of fuel to those who need it most.
"The government seems to be just providing weather reports and not action about what's happening. So, when you hear them talk about it, they talk about how much stocks we have. They say boats are arriving. They say there's not a supply issue. When the farmers I speak to, lots of the regional towns, don't have fuel at all. So clearly there's a supply issue there. I think Australians expect their government to take action, not just to provide a report on where things are going. So I welcome this action. But what we really need to see is that fuel go to the fuel stations that have some right now, to the farms whose tanks are empty."
Shadow Minister for Defence James Paterson is arguing the fuel crisis is a problem of the government’s own making.
He says that the A-C-C-C is being ignored by petrol companies because the government is refusing to exercise the significant intervention powers already at its disposal.
He is placing personal responsibility for the price hikes on Prime Minister Anthony Albanese.
Senator Paterson is arguing that since the Labor party previously held the Morrison government accountable for high fuel costs, Mr Albanese must now own the current crisis.
"Let's remember it was only a few years ago the Prime Minister was running around the country taking photos of billboards outside petrol stations saying that petrol at $1.78 following the Ukraine war was Prime Minister Scott Morrison's fault. So, petrol at well over $2 is obviously now the Prime Minister's personal responsibility, which he must address."
