If you bought exactly one gallon of gas, how would you pay for the 9/10th of a penny at the end of the price? Technically, you could pay with nine mills, a unit equal to 1/10th of a cent, but which none of us carry. About the only place we see this fraction is in gas prices.
Long ago, I had a colleague describe his dream to have an electronic monitoring system that plugged into the banking systems worldwide that would locate every time a tax proportion or interest rate generated a fraction of a cent, and it would “round down” and send that fraction to his account. Insofar as there are huge numbers of such transactions each day worldwide, he would be rich and no one would ever know or feel harmed. Of course, his personal network does not exist, but fractions of cents are being rounded up or down constantly in our financial systems.
Most historical accounts point to the early Depression years for the start of the 9/10thsof- a-cent add-on. I recall gas costing 29.2 cents a gallon in the early 1950s. Significant research has shown that humans have a distorted assessment of numbers, such that 9.9 cents seems a whole lot less than 10 cents, while an equal drop from 10.1 to 10.0 cents seems trivial. Also keep in mind that there were continual gas wars among the many gas companies of that time. If a station back then dropped its price by a full cent to attract customers away from competition, it would be a drop of 20 to 30 cents per gallon in today’s prices and that could easily wipe out profits and mean selling at a loss, then and now.
Another factor at that time was the need of national and state governments to build better roads than sufficed for horse-drawn wagons, as well as reduce deficits due to the Depression. In 1932, Congress imposed a one-cent gas tax per gallon and extended it to 1.5 cents in 1934. As of 2022, the federal gas tax is 18.4 cents and state gas taxes average 31.63 cents per gallon, according to the U.S. Energy Information Administration. Historians speculate that the gas companies’ pricing in fractions of a cent merely copied the fractions used in state and federal gas taxes.
As the supply and demand fluctuated greatly during the pandemic and the drastic cutbacks in OPEC supply in the late 1970s and now, the gas prices at-the-pump increased and decreased dramatically at the levels of dimes and dollars, but the “9/10s” never changed. This indicates it has nothing to do with real costs and profits (and the major oil companies are making record profits). But the “9/10ths” continues as a pure appeal to the human perception that 9.9 is a whole lot less than 10. And the amount of money saved when gasoline was bought at a price of 29.9 cents percent gallon in the early 1950s (versus 30 cents) was dramatically more than when you now pay $3.299 rather than $3.30 today.
Calculations made in 2014 indicate that the U.S. fuel industry “earned” an additional $1.2 billion based on the 9/10th’s of a cent per gallon, compared to rounding down to the nearest cent.
In 1985, an Iowa Senator Joe Coleman found the gas selling at that time for $1.199 was deceptive and he succeeded getting state legislation that eliminated the 9/10ths cents and forced it to either be rounded up to $1.20 or down to $1.19 with violations subject to fine and jail time. It was repealed without discussion four years later. Perhaps time is now overdue for straightforward gas price signs and discarding the 9/10ths.
Native Midwesterner John Schrock is a former teacher and newspaper columnist, and appears on Kansas public radio.
