Drivers could save up to £4.50 on a tank of petrol under the Government's proposed "Pumpwatch" scheme.
The Pumpwatch scheme would allow drivers to compare up-to-date petrol prices online - either through a website or app - so they can find the cheapest option in their area.
It comes after Brits were found to have paid an extra 6p per litre for fuel at supermarkets last year as weak competition let them charge more.
It means drivers have been charged between £2.70 and £3.90 too much for a tank of petrol or diesel every time they filled up their vehicle at a forecourt over the last few years.
The investigation, conducted by the Competition and Markets Authority (CMA), looked into the UK fuel market over the last year due to concerns that falling wholesale prices were not being passed onto customers.
According to the watchdog, supermarkets were usually the cheapest place for fuel but competition was "not working as well as it should be".
The CMA ruled that competition was "weakened" as Asda and Morrisons decided to increase the amount of money they made on fuel.
It then found that Sainsbury's and Tesco had priced their fuel by comparison to local competitors rather than the wholesale rate.
At the same time, the CMA found that motorway service stations charged around 20p more for petrol and 15p more for diesel compared to other forecourts.
Overall, the CMA found that the current pricing tactics on diesel across all retailers had cost drivers an extra 13p per litre from January 2023 to the end of May 2023.
The Government said that it would support the CMA-recommended Pumpwatch scheme and change the law to force retailers to provide up-to-date price information.
The CMA also recommended that a new "fuel body" be set up which would establish and regulate the scheme.
In it's report, the CMA says the Pumpwatch scheme could help drivers of a typical family car save up to £4.50 on a tank of fuel within a five minute drive.
Chancellor Jeremy Hunt said: “It isn’t fair that businesses are refusing to pass on lower prices to protect their profits while working people struggle with balancing their budgets.”
He also promised to take “swift steps” to enact the CMA’s recommendations with a consultation on the measures expected to be published in the autumn.
A voluntary scheme that encourages retailers to disclose prices is set to launch next month.
The RAC said it was “extremely pleased” that the Government was taking action, while the AA said the promised changes were “better late than never”.
However, it is worth noting that there are websites and apps already available which do compare petrol prices - although these are not linked with the Government.
One popular site is PetrolPrices.com which was founded in 2005 and is free to download as an app.
The site shows prices for all brands of fuel stations across the UK by obtaining data on fuel from the stations directly.
