What's Driving Differences in Gas Prices?

Thus, when gas was $2 a gallon, Northern Virginians were taxed 4 cents more per gallon than those who pump gas elsewhere in the state. Now, with $3 gas, they must pay 6 cents more (If that sounds bad, consider that drivers in Georgia pay a 4 percent sales tax and those in Illinois pay 6.25 percent).

Consumers in states with certain markup laws are similarly affected. In Wisconsin, where average gas prices have risen faster than in neighboring states in the past year, wholesalers who buy gas from refiners are required add on a 3 percent markup. Gas stations must add 6 percent more.

But what about price differences at the local level?

For that, many point the finger at a long-standing and controversial industry practice called zone pricing, in which oil companies charge different prices for the same gasoline to dealers in different neighborhoods. It is unclear where the zones lie in Washington, but several station managers in Prince George's County said they were getting a better price than their peers in more affluent Montgomery County, while one gas station owner in Vienna said he is charged more than another station in the same city.

Critics say zone pricing is price gouging, and want it banned.

"It's practically impossible to compete when you have that big a variance," said Michael J. Fox, executive director of Gasoline & Automotive Service Dealers of America Inc. Fox said he sold his station in Connecticut six years ago in part because of the practice. "Before, it was pennies. Today we are talking about differences of 30 to a documented 40 cents a gallon."

Others say that getting rid of zone pricing would simply shift profits from oil companies to dealers, and would not change what consumers pay. They defend the practice as similar to what occurs in the real estate market where the same house would be sold for a different price in a different location.

"What zone pricing represents is an attempt by the wholesalers to capture some of the profits that might otherwise have gone to the more well-located outlets," said Jerry Taylor, a senior fellow at the Cato Institute, which advocates free-market policies.

With all these economic and corporate forces at work, can drivers do anything to influence what they pay?

Borenstein, of the University of California Energy Institute, thinks so. The answer? Comparison shop.

Historically, as incomes grew and gasoline became a smaller part of the household budget, motorists became less likely to drive across the street for gas that is a few pennies cheaper, Borenstein said. That, in turn, has lead to further price disparities. "What keeps all that under control," he said, "is shopping."