What would happen if I wanted to buy exactly one gallon of gasoline?
How would they give me my change? My guess is they’d round it up to the next cent, right? They’re not going to round it down because they’d lose nine-tenths of a cent, right? Better that I should take a one-tenth of a cent loss than they should lose nine-tenths, right?
I can’t think of any other business that deals in nine-tenths of a cent. Why do gas companies do it? What would happen if competing gas stations were to drop their prices to five-tenths instead of nine? Would you make the trip across town to save four-tenths of a cent per gallon?
With my Prius, I could save four cents on a tankful!
When the gas price rises or drops a few cents, how do you refer to the new price? Do you say it’s dropped to $3.65 a gallon, or do you actually take into account the nine-tenths? Because, really, it’s $3.66 for all intents and purposes, isn’t it?
So why do the gas companies do that? Why do they consistently and uniformly (and ubiquitously!) add the nine-tenths?
Well, according to American Petroleum Institute, the practice of partial-cent pricing goes back to the 1920s when a penny was worth considerably more than it is now. In those days, stations would compete for customers by charging a penny or two less than a competitor’s price. But in 1932, a federal gas tax was enacted of 1 cent per gallon so retailers found it easier for the gallon price to end in 9 and to set aside a penny per gallon.
Then in 1933, the tax was raised to 1.5 cents per gallon, and that half-cent tax hike was probably the catalyst in changing retailers’ mindset about how to price their product. At about the same time, the gas market had morphed from Roaring ’20s “boom” to post-crash bust, torquing up competition among surviving sellers. As more discount service stations surfaced, the half-cent pricing adopted by sellers eventually cranked all the way down to tenths of a penny.
Prior to the 1930s, gas pumps weren’t sophisticated enough to accurately measure the quantity needed for under-a-penny pricing, so it couldn’t have been implemented even if someone had thought of it. But by then the mechanisms, invented in the 1880s, had advanced to a level where they could dispense fuel to the fraction of a penny.
So, the extra “tenths” is a very old tradition that’s never gone away.
I read that gas sales in February 2007 collected $141 million in nine-tenths-of-a-cent increments. In just one month!
Occasionally measures have been introduced to abolish the nine-tenths nonsense: from 1980 to 1984, for example, the state of Iowa experimented with even cents, but they eventually returned to the nine-tenths pricing like everywhere else.
An article I read said that the post-Korean War years brought us the Dwight D. Eisenhower National System of Interstate and Defense Highways (1956), and all those “high-speed” (55 or 60 mph!) highways caused the gas prices to rise because of the new demand caused by motorists “blistering along at 55 or 60 mph.”
At those speeds, motorists were less likely to notice the little “9” to the right of the full-cent price numerals. Back then, only cents and nine-tenths numerals were needed; dollar-a-gallon gas was unimagined until it arrived in shocking fashion in the 1970s!
I remember the first time I ever paid over a dollar for a gallon of gas. We were in Paradise, Michigan, on a camping trip circling Lake Michigan! The price was $1.02 and nine-tenths! What a shock!
Will we ever get rid of the nine-tenths? Probably not. At least I’m 99 and nine-tenths percent sure of that!
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