Research reveals that Black youth are less likely to use alcohol than White youth. It has been argued that Blacks are more likely to abstain because they have less disposable income, are more religious, and have more family support and/or control than White youth. It has also been suggested that not only are these compositional characteristics different and likely to suppress use rates but also that the effects of these factors vary as well. However, there are no comprehensive empirical investigations of these explanations. This study uses the Add Health Survey to examine alcohol and drug use by race and/or ethnicity and to explore how differences in composition and process might produce differences in use. Results suggest that the socioeconomic contexts of Black and White youth differ considerably. However, differences in alcohol use are almost entirely explained by differences in process, in particular, the influence of peers and the family. (Contains 3 tables.)