The crisis was sparked when high seas whipped up by Cyclone Hamish toppled 31 containers of ammonium nitrate fertiliser from the deck of the Pacific Adventurer.
As they fell, the containers punctured the hull and released the oil, also taking 620 tonnes of the chemical fertiliser to the ocean floor.
The BBC's Phil Mercer in Sydney says the environmental disaster has become a dominant issue ahead of a Queensland state election next weekend.
"This has been a debacle of extraordinary magnitude," conservative opposition leader Lawrence Springborg said of the government's response.
"A dozen people with buckets and shovels was never going to do it. The plan hadn't been activated. The government was caught short."
But Queensland's Premier Anna Bligh denied accusations that she had been too slow to react.
"These are beaches that have been battered by cyclonic activity and are severely eroded. You do not take heavy earth-moving equipment onto these beaches without first assessing them and having a clear plan of how you will proceed on the clean-up," she said.
The ship's owner, Swire Shipping, faces fines of up to A$1.5m ($977,000; £703,000) if found guilty of environmental breaches, as well as clean-up costs of A$100,000 a day.
"The company very much regrets the environmental impact caused as a consequence of the vessel being caught in Cyclone Hamish," it said in a statement.
"The company and its insurers will meet all their responsibilities."
Apart from the oil damage, experts fear the fertiliser could cause harmful algal blooms, suffocate fish and kill natural habitats.
Hundreds of people are working to clean the beaches and save affected wildlife.
Moreton Bay, a marine sanctuary worst hit by the oil spill, is home to a range of sea birds as well as turtles, dolphins and pelicans.
We went down to Coolum Beach today (about 35km north of Moreton Island), for my eight-year-old's weekly surf lesson with his school. The beach was shut and we watched the oil washing ashore in the waves and covering the sand and rocks. Terrible. This was a pristine ecosystem and it has been badly damaged in the search for money and through "risk assessment". Allowing this boat out into a cyclone area wasn't a risk worth taking however much money was involved. Laurie Cokell, Doonan Australia
I live in Brisbane, QLD, and the damage is done. This will affect tourism more than ever and it's sad because we need tourists now. Thanks to another oil company. Colin, Brisbane, QLD, Australia
This is a total tragedy!!! Apart from the obvious environmental catastrophe, this has screwed some top-notch surf spots. Devastating it is! I am on the verge of tears as I type. Just last week I was splashing about at Caloundra thinking how heavenly it was. Now it's dirty! Gutted. Completely gutted. Luke Gregory, Brisbane
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