The Price of a Gallon of Gas

For more than three decades spanning from the 1950s to the 1980s, my grandfather and three of his brothers owned and ran a service station in the Bronx. After they sold the station, whenever I was with my grandfather when he put gas in the car, he always pointed out the price. “See that,” he’d say, pointing to a sign that read $1.25 for a gallon. “It’s not a dollar twenty-five. It’s a buck twenty-five and nine-tenths of a cent. In reality, it’s $1.26.”

I was thinking about this as I filled up the tank recently. With local prices above $4/gallon, it was one of the more expensive fillings I’d ever done. It occurred to me that in both local and national news reports I’ve seen and read on the high cost of gasoline, not one of the news outlets reports the prices of gas accurately.

First, news outlet seem to report on the outliers–the stations with unusually high prices, or unusually low prices. Rarely have I seen or read a report beginning, “This Exxon station boasts a price of gallon of gasoline that is exactly the national median.” I suppose normal isn’t interesting, even if it is factual.

Second, they misreport the cost per gallon. “Here at the Springfield station,” a reporter will say, “the price of a gallon of regular gas has reached $4.25.” The camera will pan to the sign which clearly reads: $4.25^9/10. To my grandfather’s point, the price is not $4.25/gallon, but for all practical purposes, it is $4.26/gallon.

This method of pricing gasoline is so ingrained in our system that not even news reporters notice it. That people refer to the price of gas as less expensive than it actually is, must lift the spirits of gas station owners and oil manufacturer’s everywhere. But that 9/10th of a penny adds up. If you pay $4.25 per gallon for 15 gallons of gas, your gas bill is $63.75. If you pay $4.25^9/10 for the same 15 gallons, your gas bill is $63.89, or fourteen cents more for that 15 gallons.

If you fill your car up once a week, that fourteen cents becomes $7.28 for the year. That doesn’t sound like much. But look at it this way: according to the U.S. Energy Information Administration, in 2021, about 134.83 billion gallons of gas were consumed in the United States. At $4.25/gallon, that comes to about $573 billion dollars. If you tack on that exta 9/10th cent per gallon, the total comes to $574.2 billion. In other words, over the span of a year, that extra 9/10th of a cent that everyone seems to ignore costs consumers an extra $1.2 billion dollars.

It makes me wonder: why hasn’t this type of pricing caught on elsewhere? You don’t see the local Safeway selling a gallon of milk for $3.95^9/10. Monthly rent on an apartment is never listed as $1,500.00^9/10. Somehow, it seems, the oil companies and gas stations seem to have established some kind of priority in this type of pricing. Given that it fools so many people, you’d think you’d see more of it.

Written on April 4, 2022.