(WSYR-TV) — We’re not taking our foot off the gas when it comes to answering your questions about gas prices. You’ve likely wondered why the advertised price for a gallon of gas at the pump always ends in 9/10 of a cent.
It’s an age-old question that goes back decades. To answer it, the Your Stories Team spoke with Ed Jacobsen of the Northwoods Petroleum Museum in Wisconsin. Before running the museum, Jacobsen operated several service stations in the Chicago area. He’s become one of the expert voices on why gas prices end in a fraction.
Jacobsen said the practice dates to the early 1900s when states and the federal government started taxing fuel for road projects. The tax was done in a tenth of a cent because gas prices were only about 10 to 12 cents a gallon in those days.
Jacobsen said gas stations did not want to eat the cost when it came to the tax, so stations passed on the expense to customers. Eventually the fraction grew to 9/10 of a cent and has remained ever since.
So why do stations include the fraction on signs and billboards? According to Jacobsen, gas stations are required to do so by law. He said service stations are required to show the final price at the pump. He said other industries are not required to do so.
Another reason gas stations continue the practice of charging 9/10 of a cent is a bit of a marketing strategy. Jacobsen called it psychological pricing, something we are used to seeing in advertising. For instance, instead of a company charging $20.00 for an item, it will put the price at $19.99 to think you are getting a better deal.
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