Have you ever looked in gas prices and wonder, “why did my gas price drop a fraction?” That’s standard practice across the country, but it rarely explained. It turns out that it originated from the early 20th century practice of selling goods tax first placed on sell gasoline to help with funding Highway construction and maintenanceand it continues to trick modern consumers into spending more money without realizing it.
One penny in 1913 is equivalent to about 32 cents in 2024, and gas prices at the time it was about 10 cents a gallon. Adding a full penny per gallon would mean a 10 percent increase in the price per gallon, which is significant. This became especially common when the Great Recession hit and families across the country fell into poverty, so gas stations raised prices in part to minimize the impact on consumers.
Most of the gas station pushed their retail rates up to nine-tenths of a cent around the 1950s when they began advertising prices on the large signs we see today. Based on CNN,
Setting a price ending in 99 cents, also known as a “lower price,” is a popular marketing tool used to get people to Consumers feel like they are getting a deal. Who study retail prices and how shoppers handle numbers.
“To consumers, a price like 19.9 cents seems significantly lower than a price of 20 cents,” Schindler said.
status of Iowa Outlawed fractions petroleum pricing sales in 1985, but the law was repealed just four years later in 1989 and most gas stations in Iowa went back to adding nine-tenths of a cent to their gas prices. CNN cited that one gas station owner in California removed the fraction from his prices and rounded down, and he lost about $23 in revenue per day. Market reports that the nine-tenths addition to gas prices adds up to half a billion dollars a year nationwide.
It seems arbitrary to add a fraction of a penny to the price of anything because The coin is practically worthless for most people, but those worthless coins will add up to a huge profit. As someone who is increasingly fed up with business owners giving me nicknames and reputations, it’s frustrating. But if you are a gas station owner, I am sure you will be happy to earn more money.
