9/10s of gas pricing
By BILL DUNCAN
The Elderstatesman
In case you haven’t noticed, with all the news about oil spills, gasoline prices have gone through the roof once again. I may be a skeptic, but I don’t believe an oil spill in the Gulf of Mexico – as bad as that is – or a leaky pipe in Michigan spilling 840,000 gallons of crude oil in the waters of the Kalamazoo River has a thing to do with the price of gasoline here on the West Coast.
Funny how conditioned we have become. Before gas reached above the $3 a gallon mark as most gas stations are charging today, we all thought $2.79 a gallon was a bargain price. Yet Richard (Red) Phares of Oakland told me just this week he worked for a gas station in Los Angeles that was competing with a discount station across the street in a gas war in which he was pumping gas for 9 cents a gallon.
Besides that, he cleaned the car windows, checked the water in the radiator, the oil and even the air pressure in the tires. Now that was the “service” in the word service station. The days of pulling into a service station and getting a dollar’s worth of gas that last us for a week, maybe longer, are so far back, few of us can even remember those prices.
I saw a cartoon posted on an office bulletin board the other day that sort of sums up my feeling about gas price gouging. Two guys are posting price changes on a gasoline station signboard. The prices are above the $3 mark. In a dialog bubble, one says to the other: “With prices up to where they are, you’d think they’d get rid of the 9/10th by now.”
I’ve often wondered myself why the fraction is on gas prices, so I researched it. What I found is astounding. The reasoning of the nine-tenth of a cent gasoline pricing is said to have developed over the years, dating back to a time when a penny was worth, let’s say a penny.
It stems from an old merchandizing trick. Consumers want to think they’re getting a bargain, even if they know better. If, say, I filled up my tank at $2.99 a gallon, it sounds better than $3 a gallon, but in truth, I am not even saving that penny because I am paying $2.99 plus another 9/10s of a cent.
So why keep the 9/10s of a cent price in these days of $3 plus gasoline? It seems ludicrous, but old habits die hard, and after a while this fractionalized pricing, just got built into the system.
Remember though, when Red was selling that gas in Los Angeles for 9 cents a gallon, even a fraction of a penny meant a substantial difference in cost.
The popularity of the automobile, and the consequent increasing use of gasoline, did
not escape the notice of the government during the hard times of the 1930s, when the federal excise tax on gasoline was imposed. The original federal excise tax on gasoline was one cent per gallon – considering the Great Depression that was a hefty tax given the cost of a gallon of gas at the time.
If you want a good laugh, government assured the American motorist the gasoline tax was temporary and would expire in two years. Shortly before the tax was to expire, Congress enacted two bills into law that extended the tax for an addition year and increased the rate to one and one-half cents per gallon, thus the government began fractionalizing the price of gasoline.
Then came World War II and not only gas rationing, but more taxes per gallon. Suddenly, the taxes were just built in and are keeping pace with the rising gasoline prices.
If I were a gasoline merchandiser, I’d be the first to drop the 9/10s of a cent price, and we consumers would feel we were getting a bargain at the pump.
(Bill Duncan can be reached at bduncan@nrtoday.com or by writing to P.O. Box 812, Roseburg, OR 97470.)