Herb Milliner, owner of Herb's Exxon in Crisfield on Maryland's lower Eastern Shore, dropped his self-service gasoline prices another 4 cents yesterday -- to 74.9 cents a gallon for regular and 80.9 cents for unleaded.
The seven other stations in this crab and oyster town were charging about the same, and as Milliner put it, "The customer's reaping the profits."
In the Washington area, meanwhile, the lowest reported self-service prices this week for the same grades of gasoline were 91.9 cents and 94.9 cents -- an illustration of the vast disparities in pump prices around the country that have bewildered consumers and angered some service station dealers who say that they are being forced to pay higher wholesale prices for gas than others.
"We get phone calls every day from people saying they just got back from Hampton, Va., or elsewhere complaining that prices in Washington are outrageous," said Doug Neilson, a spokesman for the American Automobile Association.
As the price of crude oil has tumbled on the world market, motorists in the Kansas City, Mo., area, for example, were paying an average self-service price of 77.5 cents a gallon last week for unleaded gasoline, according to a survey by the Oil & Gas Journal, and one customer reported paying 69.9 cents a gallon yesterday in Denver.
At the same time, the average pump price here on March 5 stood at $1.108 for self-service unleaded, second only to $1.109 in New York City, according to the survey.
The largest factor affecting pump prices, according to service station owners and industry officials, is whether dealers must buy directly from the big oil companies, also known in the trade as the "mother companies," or from local distributors, known as "jobbers" or "resellers."
Distributors pay what is called the lower wholesale "rack" price, while service station dealers pay a "tank wagon price" -- and the difference between the two can exceed 25 cents a gallon.
Maryland's lower Eastern Shore is "jobber country," according to Vic Rasheed, executive director of the 60,000-member Service Station Dealers of America, but the Washington metropolitan area is not.
In Milliner's case, he buys his gas from the Triangle Oil Co., a distributor in Salisbury, 32 miles to the north. Triangle, in turn, buys its fuel from the local Exxon terminal for less than the terminal charges station dealers under direct contract with Exxon.
"I've been in this business for 20 years," said Triangle sales representative Warren Adams. "I've never seen this wide pump-price gap happen. There has never been a spread like this. It's totally out of kilter."
The disparity, in fact, has sparked a state antitrust investigation in Connecticut and a lawsuit in federal court in Texas. The suit, filed Thursday by the Lone Star Service Station Association, alleges that Mobil, Shell, Texaco, Chevron and Exxon have engaged in illegal price-fixing.
Industry officials have denied such illegalities and attribute the gap to other factors, such as transportation costs and the lag time before the newer, cheaper oil costs are reflected in dealers' contract prices.
Said an Exxon spokesman in Houston, "There's always a spread between dealer and distributor prices, but currently that spread is wider than usual. This difference varies widely with competitive market conditions . . . . "
"The domestic marketplace today is controlled by the major refineries," said Rasheed, of the Service Station Dealers of America.
According to the American Petroleum Institute, an industry group, 15 refiners account for 78.6 percent of all domestic oil sold, and eight of these account for 58.2 percent.
Independent jobbers, however, can buy refined fuels at low prices from smaller refiners or other sources, including the "spot" market of cheaper and more recently produced oil. To stay competitive with these other sources of cheaper oil, all sides agree, the big refiners charge the independent jobbers less than dealers at their own stations.
In some cases, the jobbers pass along the savings to independent service stations, convenience stores and other retail outlets. In others, they own and operate gas stations of their own.
In areas where jobbers dominate the market, the motorist stands to gain the most. Ray Bozman, a customer of Herb's Exxon in Crisfield, filled his Cadillac yesterday with 20 gallons of super unleaded for just under $20. "Beautiful, beautiful," he said, recalling that only recently he was paying $30 to $32 to fill the tank.
How low will prices go? Adams, the Salisbury distributor representative, predicted that pump prices on the lower Eastern Shore could drop to 72 or 73 cents a gallon.
Prices around Washington should drop far below present levels, he said, "or there are going to be a lot of disgruntled dealers. If they don't, everybody on the western shore is going to come over to Ocean City to buy gas."