Old gas-pricing formula continues
| • | Pump prices can be off by a shot |
By Sean Hao
Advertiser Staff Writer
The unusual practice of pricing gasoline in fractions is a legacy of a time when gasoline was sold in cents, and one-tenth of a cent represented greater savings to consumers, said Bill Green, a former owner of and now consultant to the Kahala Shell gasoline station. It's also common marketing practice to sell an item for a price that's just below the nearest dollar to give consumers the perception the cost is lower.
Photos by Richard Ambo • The Honolulu Advertiser
Today the practice of pricing by fractions of a cent is a bit of an anachronism, Green acknowledged.
Kahala Shell customer Shawnee Hammer fills up her SUV. Most consumers don't even notice that they're still paying for gasoline by tenths of a cent, a holdover from the time when gas was pennies for a gallon.
"As long as gas has been sold, it's been there," he said, referring to the nine-tenths of a cent tacked onto the price of a gallon of gas. "It probably is (outdated), but if you're going to change it, you're not going to drop nine-tenths, so basically you could argue from the customer sense we would raise it a tenth of a cent."
The practice of pricing gasoline by tenths of a cent raises few eyebrows.
"I don't think I ever looked at it before," said Shawnee Hammer of Hawai'i Kai as she pumped $41.79 worth of premium into a sport utility vehicle at Kahala Shell recently. "Usually you come in and go so fast you don't pay attention."
Because of rounding at the pump, a tenth of a cent saving has no practical impact on sales of smaller amounts of gasoline. For example, 5 gallons of gasoline purchased at $2.439 is rounded to $12.20, which is the same cost as 5 gallons sold at $2.44.
On larger purchases one-tenth of a cent can result in a penny difference in the price of a fill-up, as was the case for Aaron Nishimura of Niu Valley who bought 8.138 gallons for $2.459 a gallon of regular at Kahala Shell recently.
Pricing gas by fractions of a cent is a bit of an anachronism.
"I think of it as $2.46," he said. By having the nine-tenths, "I'm probably saving a dollar over a lifetime."
Still, at today's high prices, does the continuing practice of pricing gasoline in fractions of a penny still make sense?
"That's a good question," said Bill Pierpont, chief of the state's Measurement Standards Branch, which inspects and certifies gasoline pumps. "I think it's really just a holdover of the industry that consumers are comfortable with."
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
