Why is gas nine tenths

There are even companies that have instituted the practice. The California-based chain 99 Cents Only Stores prices to the fraction of a cent.

In , it increased the price of some of its items to A number of factors led to the adoption of the practice.

The driving factor was most likely taxes. A year later, the tax was increased to 1. The current federal tax is At the same time, the country was in the midst of the Great Depression. The explosion of automobile sales of the s, and the rapid growth of gas stations to fuel them, increased demand and prices for fuel. Throughout the s, gas prices averaged between 21 to 30 cents per gallon. However, that all changed as the Depression deepened. Demand fell and competition for the customer intensified.

By , prices were down to 20 cents per gallon, and they would continue to fall for the next decade. In many areas of the country, gas prices were even lower, sometimes less than 10 cents a gallon. Because of growing consumer price sensitivity, it was difficult for retailers to adjust their prices in full cents. Meanwhile, fuel dispensers had gotten increasingly sophisticated since they were first invented in the s.

By the s, they had advanced to a level where they could dispense fuel to the fraction of a penny. By pricing to a fraction of a cent, retailers could more easily adjust prices to lure customers. A historical picture of a Maryville Oil Co. Marketing Takes Over Over time, fuel retailers evolved to pricing at 0.

The reason is simple marketing. Retail experts have long known that goods prices slightly less than those priced at a whole number sound far less expensive. Infrastructure advances also contributed to the practice of pricing gas at 0.

It became even more common to see retailers price at 0. In August , he issued temporary freezes on wages and prices, and he reinstituted these freezes in June Retailers lost control of their ability to set their own prices at the pump, which were instead calculated by a government-mandated formula that often led to pricing that had other fractional amounts, such as 0.

Frustrated consumers reacted negatively to these unusual prices and soon the 0. Exceptions to the Rule Since the s, 0. But there have been a few exceptions. In , the state of Iowa banned fractional pricing for gasoline. Prices had to be set in full cents. In a country where people vigorously debate the merits of keeping the penny around, it seems odd to pull up to a gas station and see a fraction of a cent included in the price.

Gas stations added the fraction of a cent on the end of the price instead of rounding up the price. Back then, a full penny would have been a budget-buster for customers.

The federal tax was implemented in as part of the Revenue Act of and was supposed to expire in — except it never did. Marketplace wrote the tax was intended to help prop up budgets for roads and infrastructure during the Great Depression.

Gizmodo reported the tax was supposed to reduce overall budget deficits. In any case, instead of killing off the tax, Congress raised the fraction a little more. By then, it was clear that consumers weren't really deterred by it. As of January , federal, state and local taxes accounted for On average:. Today, U.

Consumers have tons of options for buying gas and innovative technology options to help them find the cheapest prices, via smartphone or built right into the car's infotainment system. Rounding up that fraction to a full extra penny would barely matter to most drivers. Saudi Arabia. The United Arab Emirates. California pumps out the highest state gas tax rate of The gas prices in California are the highest for regular gasoline.

Residents in California additionally deal with a high tax burden by state. California is also among the worst places for cigarette prices by state.

Why is gas nine tenths of a cent? Asked by: Justyn West. Is it worth driving further for cheaper gas? What was the average price of gas in ?