Unleaded petrol could be purchased for as little as $1.31 a litre in Ararat on Friday.

However the price of fuel in many regional centres still lags behind that of major centres including Melbourne where the cost has dropped to below $1.20 a litre.

The prices are some of the lowest motorists in the city have experienced since 2010 following the Global Financial Crisis.

The price of oil has been in free fall since June this year. US crude oil is now buying below $55 a barrel, half of what it was six months ago.

Last week the Australian Competition and Consumer Commission (ACCC) received a direction from Minister for Consumer Affairs, Bruce Billson to undertake more timely and targeted monitoring of the fuel industry.

The new direction commenced to coincide with the end of a previous monitoring direction and the introduction of the ACCC's new powers to monitor petrol prices.

The ACCC will now conduct its fuel price monitoring reporting quarterly rather than annually and has the capacity to investigate specific regions of the fuel market.

ACCC Chairman, Rod Sims said the independent body is currently analysing fuel price data to assist in targeting markets for the initial tranche of studies on particular geographic locations.

"The ACCC's role is to prevent anti-competitive conduct, such as price fixing or collusion, to protect consumers," he said.

"The new direction empowers the ACCC to take a close look at geographic areas that are of particular concern.

"While fuel prices are set by participants in the relevant market, the ACCC will analyse markets that do not appear to be functioning well.

"The ACCC will be providing further information on its new reporting framework in January."

Australian retail petrol prices largely reflect international benchmark prices for refined petrol, and domestic fuel taxes. In the short term, prices reflect the pricing policies of individual retailers.

At present the ACCC monitors automotive fuel price movements in major cities and around 180 regional locations around Australia.

Fuel prices are generally higher in regional Australia compared with the larger capital cities because of:

Lower population and demand resulting in fewer outlets, leading to less competition

Higher costs for transport and storage of fuel

Less demand for convenience sales like drinks, food and newspapers which generally have higher margins and enable sites to remain profitable on lower margins on fuel sales

The location of outlets - whether or not they are on a highway and likely to attract a high number of customers.

Mr Sims said rural and regional areas also do not have price cycles.

"Price cycles are a feature of the larger petrol markets in Australia in the capital cities," he said.

"While larger city price cycle troughs may be below average prices in rural and regional areas, their price peaks may from time to time be above that average.

"Extended petrol price cycles in Melbourne have also highlighted the difference in petrol prices compared with many regional locations where prices are more stable at higher levels."