Furious competition for a still-shrinking gasoline market has produced such a wide range of prices at the pump that a motorist can save as much as 44 cents a gallon -- or nearly $9 on a 20-gallon fill-up -- by shopping around in the Washington area.
The huge price differences, much greater than they were a year ago, have been created by oil companies and service station operators who are shifting prices and trying gimmicks in a desperate effort to hang on to their share of a declining market.
Adding to the price confusion have been discounts by some oil companies to customers who use cash instead of credit cards. Some service station operators complain that prices advertised as discounts actually represent an increase in the price for credit. But a Federal Trade Commission official says raising gasoline prices and then offering a discount for cash doesn't violate the law.
"There isn't an oil company that isn't struggling to maintain its market," according to Dan Lundberg, publisher of the Lundberg Letter, a well-regarded petroleum marketing trade publication. "Everything you see happening is part of a survival strategy, and who can say which strategy is best?"
What has heightened competition is the declining demand for gasoline, which has been caused by a combination of the recession, more energy-efficient cars and altered driving habits.
Demand is down 14 percent since 1978, according to an American Petroleum Institute analyst. In September, the last month for which figures are available, demand was down 3.2 percent from the same month a year ago.
Recently the rate of decline has slowed. "We talk about a shrinking market. It may have shrunk," said Jerry Schanke, deputy marketing director for the API. Many analysts feel that the market will continue to be unstable, however.
A random check of nearly two dozen gasoline stations in the Washington area found differences in price of 44 cents between the lowest priced and highest priced regular leaded gasoline. The range was from $1.079 at a College Park station to $1.519 (paying with credit and getting full service) at a station in the District of Columbia.
The survey also found a difference of 43 cents between the highest and lowest priced unleaded regular gasoline, from $1.559 (credit, full service) at a station in D.C. to $1.129 at a station in Maryland.
The highest priced premium was $1.569 at a station in Virginia; the lowest priced $1.329 at a station in Maryland. The highest cost diesel was $1.309 at a station in Maryland, while the lowest priced was $1.149 in another Maryland station.
A similar survey a year ago found that the greatest price spread was a 29-cent difference between the highest and lowest priced unleaded regular.
One station, Geddes Texaco on Rockville Pike, even offered leaded regular gasoline for 99 cents for two weeks earlier this year and again for a day and a half at the end of September. "It was the end of the month, and I needed room for a tanker of gasoline , so I dropped my price. What the heck," said Carey Geddes, the owner.
"Prices seem to be more competitive than they've been for awhile," said Bill Shoemaker of the Greater Washington/Maryland Service Station Association.
"Motorists are enjoying a bonanza as long as it lasts," said Vic Rasheed, executive director of the Service Station Dealers of America. "There have been a series of ups and downs. I don't think the market has been settled for many years, and I don't think anyone can say when it will be settled," he said.
Those two organizations complained to the FTC about the advertising of discounts for cash purchases. Anne Fortney, the FTC's associate director of credit practices, responded that "Nothing in the Cash Discount Act prevents a dealer from raising all his prices and giving a discount for cash.
"The act requires that a dealer giving cash discounts post the higher [noncash] price, make the cash discount equally available to all consumers and disclose the availability of the discount clearly and conspicuously."
"She didn't address our question about identifying a surcharge for credit as a discount for cash," said Shoemaker.
Thomas Crosby, a spokesman for the American Automobile Association, said that preliminary results from the AAA's periodic survey of gasoline prices indicate that customers balked at higher prices triggered by the discount-for-cash programs. That reaction appears to be bringing prices back down, he said.
Several oil companies now charge dealers credit-card processing fees, encouraging the dealers to offer discounts for cash. Other companies, such as Atlantic Richfield, Getty Oil, Clark and Pennzoil have dropped credit cards entirely. Still other companies now honor any oil company's card but discount for cash. Shell and Sun charge the same price for cash or credit.
Rasheed predicted that credit cards will not disappear, noting that credit-card customers typically buy twice as much gasoline as cash customers.