Costco Fuel Stations Draw Americans Seeking Lower Gas Prices

Fuel stations operated by Costco in the United States are witnessing unprecedented congestion, with demand reaching the highest levels in the company’s more than 50-year history. This surge comes amid rising gasoline prices and growing consumer worries about continued inflation.

During its quarterly earnings review, Costco reported that its fuel stations have become so crowded that it has had to call fuel transport trucks multiple times daily to ensure supply does not run out. An increasing number of customers are filling only small amounts of fuel, anticipating future price hikes.

With gasoline prices exceeding $4 per gallon nationwide and surpassing $6 in some West Coast areas, Costco has become a primary destination for drivers looking for prices approximately 30 cents per gallon lower than those at traditional stations, according to a report by the American news network CNN.

Despite long queues at several locations, customer turnout continues to grow, with a rising number of Costco members visiting fuel stations for the first time in recent months.

Economic Outlook Amid Rising Fuel Prices

Kevin Hassett, director of the National Economic Council at the White House, described the overall economic situation in the United States as “positive,” despite rising fuel prices, ongoing inflation, and increasing public concern about the economy amid the ongoing conflict in Iran.

Costco’s Fuel Pricing and Profit Model

Contrary to some perceptions, Costco does not use fuel prices as a loss leader to attract customers. The company does make a profit on fuel sales, but these profits are very limited, amounting to only a few cents per gallon. This contrasts with traditional fuel stations, which typically have profit margins ranging between 25 and 35 cents per gallon.

This difference stems from business models: most other fuel stations are small, independently owned businesses often linked with convenience stores or repair shops, requiring higher profit margins to cover operational costs.

In contrast, Costco benefits from its large scale and membership model, relying primarily on subscription fees as its main profit source. These fees accounted for about two-thirds of the company’s profits last year.

Industry Warnings and Competitor Challenges

Neil Chapman, ExxonMobil’s first vice president, warned that energy prices could rise significantly in the coming weeks.

Costco sells most of its products, including fuel, at prices close to or sometimes below cost, similar to its well-known offers such as rotisserie chicken priced at $1.50.

Competing fuel stations depend on profit margins to cover operational and maintenance expenses, making them more vulnerable to demand fluctuations. When fuel prices increase, driver consumption tends to decrease, exerting pressure on these stations’ ability to maintain higher profits.

According to this model, rising gasoline prices create an inverse effect: while Costco benefits from increased customer traffic, traditional fuel stations face declining profit margins.