Rant of The Day - .9 Cents in The Price of Gas

Okay, so let's say this is photography related because we are seeing all these images of stations with skyrocketing gas prices. . . (best I could come up with)

In any case, with gas in the USA over $3.00 a gallon, is it really important to continue charging $3.49 9/10? The .9 goes back a long way to when it was under 25 cents a gallon. Don't you think its time to just charge the full cent?

I know this is a nit, but I had to get it off my chest. (Okay, down off the soap box)

Have Fun,

$3.50 a gallon is cheap. In Denmark it cost $6.70 per gallon.

Look guys, dont even go there. You want to see what expensive Petrol (Gas) looks like just visit England.

One thing I cant understand though. The Petrol (Gas) at my local garage(service station) was purchased several months ago, then refined and then delivered to the garage(service station) probaly at the end of last week. That was before all this happened. So why has the price of this petrol(gas) gone up

N

This was brought up on the radio in my area just yesterday. There's a couple of reasons I can name. One is commoditization. When you buy a commodity, you pay the market rate. Say you buy a dimond ring today for 1000.00 ($ or ₤, as appropriate). Suppose that tomorrow, a major diamond mine suffers a collapse and the market price of diamonds doubles as a result. Now, imagine you have two buyers interested in your ring. One will only pay 1050.00...the original price you paid plus a modest profit. The other is willing to pay the market price...because that's what your diamond is worth in today's market. Who will you sell it to?

Next is a reason more pragmatic on a day-to-day basis. Yes, perhaps the petrol in the underground tanks cost the garage owner only 10,000.00 two weeks ago. But how does he pay for the petrol delivery coming tomorrow that will cost him, say, 14,000.00? In the U.S. at least, that's money due on the spot, cash or check, or the petrol doesn't go leave the tanker truck.

To put another perspective on it, look at the reverse of the situation. Say that station owner just filled his tanks for 14,000.00 yesterday. Today, the price of oil takes a nosedive. Does he lower his price immediately or continue to offer at the higher price until he gets a refill? Will you, the customer, buy his petrol at a price determined by what he paid for it...or will you go somehere else that offers it at the lower market price, perhaps because they just refilled their tanks at lower cost?

I knew this thread would stray from the topic of the .9 cents, so to take it along a bit -

Last night I went to fill up. The station that I usually go to on the way home was at $3.71 (and 9/10), which was higher than the station I pass on the way to work in the morning (even premium was under $3.00 there yesterday morning). So I decided to go there - 70 cents a gallon is worth the effort. It is about 7 or 8 miles from one to the other. Going down the main drag to get there, the range in gas prices was unbelievable - over 60 cents between the high and low for regular. When I get there, they had raised their prices over 70 cents since the mornng. So I went to another station a couple blocks away and got my mid grade for $2.99 (and the infernal 9/10). The folks were all lined up to get gas there.

This morning, that same station was up there with the rest of them.

I'm told that the cost to the station is set when the tanker fills the station's tanks. The honest station owners (like the one I bought from last night) wait until the truck comes to change the price. Other less scrupulous owners jack it up ahead of time.

But back to the topic - why can't they drop the .9 cents?

Have Fun,

Well, I imagine that 9/10ths of a cent would add up to quite the tidy sum over many thousands/millions of gallons. What gas retailer would want to lose that? At first blush, it would be more to their benefit to simply add the 1/10th cent to make a nice, round figure. But, I suspect the reason is the same as other retailers marketing their wares at a penny (or two, or three, or five) less than a whole dollar figure. Psychology.

I seem to remember reading a study or two long ago (but don't quote me) that indicated dropping one cent off of a whole dollar price can increase sales as much as 40%. That's a return of up to 38.6 additional cents on every dollar for a one cent cut. I figure it probably works similiarly for gas.

The really crazy thing in the UK is that the major chunk of the cost is tax. We have a realy high petrol tax, but not content with that we are then charged 17.5% Value Added Tax on the petrol tax (which we pay for with money that has already been subject to income tax)

I wont hijack the thread any more I promise.

N

Yo Guys, you're missing Ricks point!
Rick is not complaining about the price of gas. He is opining about the need for the 9/10 cent on the price.
Instead of $3.49 9/10 per gallon just call it $3.50 and be done? It is only 1/10 of a cent.
Rick, I think it is a carry over from the era that it just sounds better. It is psychological. It just makes you feel better at say $3.49 9/10 because it has not hit the $3.50 milestone (long past by the time I get this posted I suppose ).
I agree with Rick. It is only self delusional and is wasted on me.

P.S.
Rick, if I have missed the point then let me know.

Skip, you are dead-on - but with prices the way they are (and the USA having been spoiled for so long with prices so much lower than other parts of the world), I knew this would be a thread that looked like a classic 'Family Circus' comic strip. We will go all over the place before we get from Point A to Point B.

Its not the biggest issue, and everybody (at least in the USA) takes it for granted, but perhaps it is time to give up the ghost of the past. If you want to sell gas (petrol, benzin, whatever you call it) for $3.50, sell it for $3.50 - not $3.499.

Have Fun,

I will have you know that I am an expert at missing the point and this thread has just proved that practice makes perfect

neil_r wrote:
I will have you know that I am an expert at missing the point and this thread has just proved that practice makes perfect

Neil, you are in good company though, myself included on most occasions. Rick just happened to hit one of my pet peeves.

That will be $29.95 plus parts and labor, batteries not included.

But just to prove that I can be on the point…

Do you remember those old cash registers that had a bell in them, you know,whenever the assistant pressed the buttons to “ring up” the price there was an audible indication that they were opening the cash register door. Well the reason that prices were always a fraction under or over a note size i.e. 99 cents or 99 pence, $4.88 or £4.99 was to ensure that the assistant had to open the till in order to make change. Had the value not required change it would have been very easy for the assistant to pocket the note and no one would have been any the wiser. That, apparently, is why we started with the “just under” prices.

If you are still awake, you are welcome.

N

Cha-ching, cha-ching, cha-ching.
Good help is still hard to find.

And we are sending gas to the US to help the shortage and keep their prices down! Forgive me, but I fail to understand how the the world's largest economy is in the position that they need the UK to dip into its reserves of gas.

Baffled