Have you ever looked? Gas prices and asked myself, “Why is there a fraction of my gas price?” It’s a common practice across the country, but it is true rarely explained. It turns out it stems from early 20th century sales practices Steer were created first Gasoline sales contribute to financing Construction and maintenance of highwaysand it continues to trick modern consumers into spending more money without even realizing it.
A single cent in 1913 was equivalent to about 32 cents in 2024 Gas prices Back then it cost about 10 cents a gallon. A full cent per gallon increase would have meant a 10 percent price increase per gallon, which is significant. This became particularly evident when the Great Depression struck and families across the country fell into poverty. Therefore, gas stations implemented small price increases to minimize the impact on consumers.
The most Gas stations In the 1950s they increased their fractional fees to 9/10ths of a cent when they began advertising prices on the large signs we see today. Accordingly CNN,
Setting prices that end at 99 cents, known as “just below pricing,” is a common marketing tool that makes consumers feel like they’re getting a bargain, said Robert Schindler, a professor of marketing at Rutgers School of Business -Camden WHO researches Retail prices and how shoppers process numbers.
“For consumers, a price like 19.9 cents feels significantly lower than the price of 20 cents,” Schindler said.
The state Iowa forbidden fraction Gasoline prices Although the law was reinstated in 1985, just four years later, in 1989, the law was repealed and most gas stations in Iowa increased their gas prices again by 9/10 of a cent. CNN cited that a California gas station owner subtracted the fraction from his prices and rounded it down, losing about $23 a day in revenue. Marketplace reports that the additional 9/10 share of gas prices nationwide amounts to half a billion dollars per year.
Since then, raising the price of anything by a fraction of a cent has felt arbitrary Pennies are practically worthless for most people, but enough of those worthless pennies adds up to a pretty big profit. As someone who is increasingly fed up with being nickel-and-dimed and insulted by business owners, this is annoying. But if you’re a gas station owner, I’m sure you’re excited about making more money.