The Élysée wants to scrap the 1963 ban on selling fuel at a loss in order to curb rising inflation. Oil industry leaders have strongly condemned the move.
The French government is taking on the oil industry after the finance ministry announced plans to allow petrol to be sold at a loss.
The practice has been outlawed in the country since 1963 over fears larger retailers could drive small competitors out of business by offering artificially low prices whose costs they could afford to absorb.
But now the Élysée wants to scrap the ban in order to curb rising inflation. In August, prices rose by 6.8% in the energy sector alone.
"We regularly hear retail managers say that they are sometimes hampered by regulations, that the government sometimes prevents them from doing more for consumers. We hear this message," said French government spokesperson Olivier Véran on Wednesday.
"We are proposing to lift a certain number of constraints for a set period of six months, and we're proposing to those who wish to do so, without any obligation, to take part in this collective effort," he added.
Oil industry leaders have condemned the decision - with independent stations saying the move cause force them out of business.
"My members get 40 or 50% of their income from fuel sales, so if they sell at a loss, I'd give them three months" to survive, said Francis Pousse, president of the Mobilians industry group representing 5,800 independent service stations.
Large groups "can't keep losing 15 cents on every litre of fuel," Pousse added, saying he was "sceptical" of the measure's effect on purchasing power.
Oil giant TotalEnergies - which operates one-third of French petrol stations - said it would keep prices below 2 euros a litre into next year.
The new law is due to come into force in December. In Europe, only retailers in Germany, Austria and the Nordic countries can petrol at a loss.