Well, it depends what kind of gas mileage you get and how much you value your time, but lets assume a fuel-efficient car and say $0.20/mile in gas, and $20/hr for your time. In that case, living closer saves you (8 hrs X $20/hr) + (120 miles X $0.20/mi) = $184, or a little less than the extra $200/month. If you consider your time to be worth more, you might come out ahead by moving, but you also have to factor in that you like your apartment and your neighborhood and the costs of the move itself (renting a truck, the time you'll spend packing & unpacking, potential property damage, etc).
I'd say you're probably better off staying put.