9/10ths Pricing Helps Gasoline Station Profits

Some say the pricing allows gasoline retailers to pocket more money.

May 27, 2011

WASHINGTON - Gasoline is priced to the 9/10ths of a cent, a calculation that most motorists think nothing of when filling up. But that 9/10ths has a way of making the driver pay more for gas, Reuters reports.

If a gasoline station posts regular gasoline costs $3.89-9/10ths per gallon, drivers think they??re paying $3.89, when in reality it??s $3.90 because retailers round up the gallon cost to the closest penny.

"Most people don??t see that 9/10ths. Psychologically, it??s a marketing ploy," said John Townsend, AAA Mid-Atlantic Region spokesman. He added that the 9/10ths fools drivers into thinking the cost is a penny less than it is.

With U.S. gasoline demand predicted to average around 380 million gallons daily in 2011, that extra one-tenth of a penny on those gallons comes to $380,000 per day ?" close to $139 million annually.

Gasoline stations probably started using 9/10ths pricing in the early 1930s when the federal gasoline tax jumped from a penny to 1.5 cents per gallon. Currently, the federal gasoline tax comes to 18.4 cents.

During the Great Depression, gasoline retailers priced gasoline to less than a penny because a half penny meant something more to the millions of out-of-work Americans. Nine-tenths pricing then became commonplace for gasoline stations, said Jeff Lenard, NACS spokesman.

"No one ever looks at the 9/10ths but they know it's there," said Lenard. "Nobody feels the bait-and-switch with the 9/10ths."

American gasoline stations do not have to use 9/10ths pricing, but Lenard doesn??t think there are any retailers selling fuel at 8/10ths or 7/10ths as a way to beat the competition.

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