What does the 9/10 on gas prices mean? Why do gas stations add this to gas prices? Find out in this article what it means to see 9/10 gas prices all over America.
How do you explain gas prices?
When gas prices rise, drivers tend to ask so many questions and want to know why gas prices are rising; however, there is no single cause of gas prices going up. Also, there is no one person that controls gas prices. The factors below combine to explain gas prices in America.
In every gallon of gas, you buy, you must consider the cost of acquiring and refining crude oil, the cost of distributing and marketing the gasoline, and the state and federal taxes.
Apart from these factors, gas prices also respond to any geopolitical events that impact the oil market, including political and economic situations in the region.
What does the 9/10 on gas prices mean?
So, what does the 9/10 on gas mean? The act of tacking 9/10 of a cent at the end of a gas price can be traced back to when gas cost only pennies per gallon. The tack was used to recognize a tax imposed by state and federal governments on each gallon of gas you buy.
So, gas stations added a fraction of a cent at the end of the price instead of rounding up the price when the federal tax was started in 1932 as part of the Revenue Act of 1932, which was supposed to expire in 1934, but it never did.
As the expiration of the gas tax reached, congress, instead of ending it, extended and increased it, with the intention to use it to provide the needed funds for roads and infrastructure during the Great Depression.
During that same period, gas stations in America began to show prices of gas by fractions of a cent, making many Americans believe that the tax was simply a fraction of a cent. Moreover, taxes per gallon of gas at that time was about 10 cents, so the amount of the additional tax was quite insignificant.
However, despite the gas price increase, the 9/10 tax has remained. As of Jan. 1, 2022, the total state taxes imposed on a gallon of gasoline in the US was 31 cents and 33 cents on diesel. However, a few states, like California, Hawaii, New York, Florida, and Washington, pay as much as 58.8 cents per gallon in local taxes.
When you add federal taxes on an average of another 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel, the rate increase, showing fractions of a cent, but the 9/10 figure to account for it is long outdated.
What is the best explanation for high gas prices?
No single person or factor determines the price of gas in the United States of America. Rather, t depends on many determinant factors according to API. First, petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price you will buy gas at a gas station.
Oil prices are at a seven-year high because there has been a persistent global supply decline, workforce constraints, increasing geopolitical instability in Eastern Europe, the economic rebound following the initial stages of the pandemic, the war in Ukraine and Russia, and policy uncertainty from Washington.
All these factors combine to explain why gas prices are on the increase in America.