Gas and 9/10 Cent: What Difference Does It Make?

9/10 cent

My husband and I often remember prices differently: I think it was $5; he thinks it was $4. Turns out it was $4.99. The difference is how we view the cost — I automatically round up in my mind: $0.89 becomes $0.90, $1.46 becomes $1.50, $1288 becomes $1300. He tends to block out anything after a decimal point. Apparently, most people are like he is. Psychologically, they see $9.99 as “under $10,” even if tax puts the total cost over $10.

That’s why gas stations tack 9/10 cent onto the price of every gallon sold here in the U.S. Chances are, you are so used to seeing this fraction at the end of the ever-rising gas prices that you hardly notice it anymore. But the gas companies don’t forget about these not-quite pennies. Wisegeek calculates that those extra fractions bring in $1.7 billion annually, an average of $4.50 from each customer. (I bet those gas company executives believe in the value of a penny!)

Some people attribute motives more devious than simple profit to the creators of the 9/10 cent pricing. This site points out that rounding 9/10 cent to the nearest penny statistically favors the seller and that fractional pricing creates a false sense of accuracy related to the amount of gasoline pumped. The same site points out that you cannot purchase a single gallon of gasoline at its advertised price – a suggestion that gas stations are engaging in false advertising. At least one gas buyer feels cheated by these practices. He says the gas stations are stealing from us by failing to make change for the whole penny we give them. Seeing how those fractions add up, he may be right, but does anyone want to sue a gas company for $4.50 a year?

Back when gas cost less — say, 30 cents a gallon — the 9/10 cent may have made a noticeable difference to consumers (3% of the total bill). Now it accounts for such a small portion of the sale (about 0.3%) that changing the price of a gallon from 9/10 cent to 7/10 cent would not make a significant difference in the total gas bill. (I can’t imagine anyone making a u-turn to go to a gas station across the street that charges 2/10 cent less, though I have seen such a move made for a penny per gallon difference.)

On the other hand, such a price change might have a psychological effect on the customer. Buyers may believe that a change in the fraction correlates to a change in the wholesale price the gas station pays — if you charge me $3.106 instead of $3.109, it’s because your costs changed by that much. It sounds silly, but the same person who complained about gas stations stealing partial pennies hinted at this idea by saying of Canada, whose penny fractions change, “Sounds like they have a real price thing there.” I wonder if Canadian gas stations are also more likely to give change for 4/10 cent.

Image courtesy of silverxraven

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12 Responses to Gas and 9/10 Cent: What Difference Does It Make?

  1. Miranda says:

    An interesting post. This is an issue for a lot of people. It may not tack on a lot, but some folks really think about it as the cost of gas goes up and cuts into family budgets.

  2. Stan Jacobs says:

    In the late 1040’s, their was a gas war. they were selling gas at 15.3 cents a gallon (not sure what the price of gas was)when some stores were selling gas at 16.00 cents/gallon. others sold it at 15.99 ents per gallon. when you are traveling at 40 miles/hour, you see a sign for 15 cents, you stop to get the gas. lets face it, one penny saved per gallon and if you get 15 gallons. thats one gallon of gas free.

  3. wayne says:

    I was just reading the wisegeek site, and the figures you quote are off by a magnitude of ten. It’s actually 140+ million, not 1.4 billion, and the 170 million +- figure they showed was only after a theoretical carrying of the practice to the hundredth of a cent instead of just a tenth.

  4. D. Sitarz says:

    When the 9/10th per gallon first began, it made a difference as gasoline as penny’s per gallon. Today… every dealer does it, and it is a minute fraction of the cost per gallon. If you see $3.29-9/10th and the dealer across the street is selling for $3.30-9/10th… there is a penny difference. Just ignore the 9/10th because it does not make a difference… it’s the cent figure that is important. And if every seller does it (which they do), the oil companies are not stealing pennies… it’s the way it is, period.

  5. K. Yayese says:

    Uh… yeah. The 9/10ths is a remnant of a tax for the construction of the Alaskan pipeline. It’s just too small a fry for anyone to take the time to repeal.

  6. Xander Crews says:

    Or, they could just not tack on the fractions of a cent and price their overpriced product like everyone else prices theirs.

    Let’s say you go to a gas station and the gas is $4.14 9/10 per gallon. You buy 1 gallon of gas, and pay $4.15 in cash. Try asking for your 1/10th of a cent in change. It should be yours, but no…they “round up”.

    “Rounding Up”…? How is that legal? Who else does that? If something I buy is $3.88 after tax, I am not charged $4.00. I’m charged $3.88.

    Oil companies or gas stations or whoever tacks those fractions of a cent on need to start charging the consumers exactly what they are advertising the price as being…and better yet, eliminate the stupid tenths of a cent. We don’t carry around coins worth 1/10th of a cent, so how can they be allowed to price something like that?

    Rounding up costs consumers billions in overcharges every year.

  7. Ron says:

    Many years ago, gas stations had the price of gas on their signs then the gas tax sign right under it.
    It was the gas tax sign that had the 9/10 on it.
    I worked at a station back then, too for a short time.
    Even then, I questioned that.

  8. cLcJ13 says:

    Even if the 1/10th cent was left over from the tax law, it is still being stolen from consumers for every gallon of gas purchased in the U.S. I know it is a very small amount per person, but you have to admit if you or I stole 1/10 cent from millions of people we would be labeled criminals and end up in jail.

  9. Ricky says:

    I think that extra money should go to the government part of debt reduction. If its 5 billion a year or 4 billion or what ever the amount it could be put to a better use. How much extra is paid per customer per a lifetime. I started driving at 16 so I have been driving 44 years how much has been taken from me. How much has been taken from all drivers? It is more than 4.50. We are being ripped off daily.

  10. oldman says:

    In 1964 a dollars worth of U.S. silver coins (dimes, quarters, half dollars or silver dollar) would buy 3.3 – 4.0 gallons of gas (25 to 30 cents a gallon). Today a dollars worth of U.S. silver coins that were minted in 1964 or before contain enough silver to buy 3.1 – 4.1 gallons of gas.

    The price of gas hasn’t changed much in 50 years, but the value of the U.S. dollar continues to drop.

    Let’s look at that again. If someone put $10 of U.S. quarters in a sock drawer in 1964 and took them out today, 30 – 40 gallons of gas could be purchased with that silver based curreny.

    But if that same person had put a $10 bill in the sock drawer back then and took that out today between 2.3 – 3.0 gallons of gas could be purchased with that fiat currency.

    It is not the gas companies that are sticking it to us. After 50 years they are still charging about the same price. It is the Federal Government and the Federal Reserve working together to siphon away the value of the dollar that is driving up the prices.

  11. Andrew says:

    You aren’t thinking about this clearly. 1. How do you know they are tacking anything on? Maybe they are cutting the price by 1/10 cent instead. 2. Why is ’rounding up’ legal? Stupid question. It’s legal because as a practical matter they have to charge an amount that comes to an even cent. It’s impossible to charge a fraction of a cent for the total purchase, so rounding must be done. Furthermore, gas stations do not always round up. Instead they round the fractional cent on the total purchase to the nearest cent. If the fractional cent is one half cent or more, it is rounded up as in your example, but if it is less than one half cent it is rounded down. It’s interesting how you conveniently left the latter fact out just so you could complain about being cheated by gas stations. So if you are really so concerned about being cheated out of one tenth of a cent, the solution is in your hands: Instead of buying 1 gallon of gas all you need to do is buy 1/1000 of a gallon more. In your example, if you had purchased 1.001 gallons instead of 1 gallon, your bill should be $4.153149, but if you do that, you’ll find that the gas station only charges you $4.15 (they round down–how is that legal?), the same amount you paid for only a gallon. You would be able to buy the gas for less than the advertised price. So if you are being cheated, it’s your own fault–so stop complaining. 3. Who else does that (i.e. rounding up)? Well, government does. I don’t know how it is done in other states, but in Pennsylvania the sales tax is 6%. But just try making a purchase of $10.01 which if the tax was rounded to the nearest cent should be 60 cents tax. In this situaion, however, (unlike with gas stations) the tax is not rounded to the nearest cent. Instead any fractional cent no matter how small is ALWAYS rounded UP. In the example above the retailer would charge $10.62 which includes 61 cents tax. This is how retailers are legally required to charge sales tax in Pennsylvania. 4. “Oil companies … need to start charging … exactly what they are advertising the price as being…” As pointed out above, they can’t do that. 5. “better yet, eliminate the stupid tenths of a cent…” For some reason you seem to think that if fractional cent pricing were eliminated, gas stations would reduce the price of gas by 9/10 cent per gallon. Possible, but I don’t think that’s the most likely result. It seems more likely to me that they would raise the price by 1/10 cent. I’m puzzled why you would think that would be an improvement. Furthermore, that wouldn’t even solve the problem you complained about in your example. Oh, yes. The person buying exactly 1 gallon would pay the advertised price (instead of 1/10 cent more than the advertised price), but what about the person buying .999 gallons? They’d still have the same problem. A fact which you conveniently overlooked. If Someone bought .999 gallons of gas at $4.15/gal. the charge should be $4.14585 but the gas station would charge them $4.15. There’s that ’rounding up’ problem again (How’s that legal?). The only way you could get rid of that ‘problem’ is by pricing gasoline at an even number of cents per gallon and selling it only in one gallon increments. Perhaps you think that’s a better situation, but most consumers would be up in arms if gas stations started doing that. With ‘friends’ like you consumers don’t need enemies.

  12. Cory says:

    It’s interesting that if gas were raised 1/10 cent per gallon, how much it would cost the average person annually. If you drive 15,000 miles a year and your car gets 15 MPG, you buy 1,000 gallons a year. 1,000 gallons at 1/10 cent works out to 1 dollar per year.

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