Explainer: Why Do Gas Prices End in Fractions?

If you’ve ever been to a gas station in the US, it’s very likely that you’ve found yourself wondering why the prices always end in fractions of a penny. You might have theorized that it’s just to make the price look cheaper, and to some degree you would be right, but that’s not how the practice originally started.

The first time gasoline was priced this way was likely as a result of Congress expanding the nationwide gas tax from $0.01 to $0.015 in 1934. As a result gas stations began experimenting with pricing their product down to fractions of a penny. That may not seem like a lot to us, but it mattered much more to consumers who were used to paying around $0.10 per gallon.

So if no one really worries over a tenth of a penny anymore, why not just round up? That’s where the marketing perception comes in. Enough people will go to the gas station with the ever-so-slightly cheaper fuel that it just makes sense for the owner to keep pricing things this way.

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