It is, but I think most of it is packaging and shipping costs. It's sort of analogous to engine oil. I'm not a chemist or petroleum engineer or whatever, but I think the process to refine oil into motor oil isn't much different than that of refining gasoline. Yet a quart of oil on the shelf of Schucks/Kragen/CarQuest/NAPA/whatever is FAR more than a 1/4 of a gallon of gas at the corner gas station. If you could buy oil in bulk (in 55 gallon drums, like auto shops get it), it's probably much cheaper, and if you could justify buying it by the tanker truck load, it's probably just about the same as gas.

With water, small bottles are expensive, but if you go down to your local Culligan man (hey!), you can get the same stuff for a tiny amount. When I was camping in a trailer without running water, I was able to refill my 2-gallon dispenser at Culligan for about a buck and a half, and a 5-gallon bottle was only a little bit more. It tasted exactly the same as the $2 Dasani from the vending machine.

If you do want the convenience of portable bottles and don't want to hassle with refilling from jugs, the best and cheapest I've found is the Kirkland Signature bottled water at Costco. I actually prefer the taste of that to Arrowhead, too.