Rounding Up

On Saturday, the yellow “low fuel” warning light blinked on in the Kia, and after picking up the Little Man from a friend’s house, we stopped to fill up. A local station had gas listed for $1.96/gallon, which is about as low as I’ve seen around here. We stopped. I pumped. I filled the tank—about 16 gallons—for under $30.

Gas Prices

My grandfather and three of his brothers ran a service station in the Bronx for thirty years. He taught me many things about cars, but the lesson that sticks our first and foremost in my mind is that people tend to overlook the 9/10 at the end of the price listed for gasoline. This is why I said I paid $1.96 per gallon, not $1.95.

Rounding up might not seem like much of a difference, but it is a more accurate reflection of what you really pay. I paid about 16 cents more than I would have if the gasoline was actually priced at $1.95 (in which case it would have been listed at $1.95 and 9/10). People think of first three numbers, my grandfather assured me, and ignored that last fraction of a penny. Not much difference on an individual transaction, but consider how much gasoline is purchased each year, and that mental difference adds up.

The U.S. Energy Information Administration says 136.78 billion gallons of gas were consumed in the United States in 2014. Assume the price of a gas was $2.00 per gallon ($2.00-9/10). Assume that most people ignore that fraction at the end and believe they are paying a flat $2/gallon. Based on this, we would assume that $273.56 billion worth of gasoline was sold in 2014. We would be wrong. Tacking on that addition 9/10-cent per gallon adds $1.23 billion to the total. Claiming I paid $1.95 and ignoring that 9/10-cent/gallon adds up to over a billion dollars a year.

This is why I always round up.

You would think this gimmick, which works so well for the gasoline industry, would work well in other industries. But I haven’t seen it adopted anywhere but gas stations. And I have yet to see a gas station buck the tide, and say, you know what, we’re going to round up to the nearest penny, and to hell with the 9/10 nonsense. I’d buy gas from a station that listed their price as an even $1.96 over a station that listed it as $1.95 9/10.

Still, it is a neat trick. I wonder if it would work for writers. Could I ask for 25-9/10th cents per word, instead of 25 cents? That would mean an extra 9 cents for every ten words that I wrote. Even in a short piece like this, it amounts to an additional $4.50.

Just enough to get me 2.297 gallons of gas.

5 thoughts on “Rounding Up

  1. It started in the 1930s as a way to pass on a federal road tax to consumers. (It was either 1/10th or 3/10ths of a cent, as I recall.) Then the stations caught on to the scheme — helped by the fact that they were pricing something that everyone buys at least 10 of. They realized that mill-pricing (a mill is 1/10th cent) was a great trick to make people think they were getting a better deal than at the station next door. Of course, since every station does it now, you might argue that all its value as a psychological trick has long since evaporated. But by the same token, no one is going to stop.

    You can mill-price anything, legally (and always could, from the beginning of the U.S. currency system in the 18th century). No one really does, though, except for things bought in bulk.

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