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Why Do Gas Prices Include a Fraction of a Cent?

It’s a familiar sight. You pull up to the pump to fill up your car’s tank and the price for a gallon of regular reads something like “$3.619.” Where does that additional 9 come from? You couldn’t walk into the gas station and give the cashier $3.619 for a gallon of gas. They round it up to $3.62 because there’s no coin with a denomination of a fraction of a penny. And this rounding up is exactly why that fraction of a cent is included in the price of a gallon of gas.

On the scale that one person buys one tank of gas, a few fractions of a cent amounts to almost nothing. Assuming you bought 11 gallons of gas, the gas station would make about a dime more than they would have if the price had been $3.61 with no additional 9. But those 9/10 of a cent add up fast on the scale that everyone together buys gas. From you as an individual, they bring in additional $4.50 a year, but yearly, the additional 9/10 of a cent brings in an additional $1.7 billion in revenue. That’s right, not million, billion. So while those 9/10 of a penny might not seem like much at the pump, they’re definitely there for a reason.

fractional gas prices

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This entry was posted on Friday, April 11th, 2014 at 7:51 pm. Both comments and pings are currently closed.