Zone pricing is a practice under which refiners sell gasoline to retailers at wholesale prices that differ across geographic areas. Generally, these geographic areas vary in the level of competition and traffic counts. Thus refiners charge more in areas where demand is high and/or competition is low. This practice is viewed by some as price gouging and by others as a natural outcome of competitive markets.
While wholesale prices are not available at sufficient detail to determine whether zone pricing is occurring in Illinois, it is possible to examine retail prices in different areas. For purposes of illustrating possible zone pricing, gasoline prices were compiled for a 170-mile stretch along Interstate 55 from Litchfield to Dwight. This is an area outside the immediate influence of the Chicago and St. Louis regions. Areas have been grouped into three categories: 1) large cities, 2) along the interstate, and 3) rural towns. Springfield and Bloomington are the only two larger cities in this area. Gasoline prices are available for 12 towns directly along the interstate and 18 towns that are away from the interstate, but located within 20 miles.
Data for two dates during the past month show that prices average five to eight cents per gallon higher at stations along the interstate than at stations in the cities of Bloomington and Springfield. Prices are also four to six cents higher in the smaller cities and towns located away from the interstate. Clearly, the higher level of competition within Bloomington and Springfield results in lower prices. On the other hand, the captive market along interstates or in the smaller towns results in higher prices. Whether this is a function of wholesale zone pricing or a higher retail markup is unclear.