Costco Gas Stations – Look At This..

One thing to understand is the way the gas station industry works. The gas you get at Costco is the same gas you get Chevron, Shell, Valero, or other gasoline stations. The same truck will actually, in some cases, deliver fuel to and then visit a Chevron/Shell/Valero/etc and deliver fuel there. The only real difference is the additive they add to the gas at each station. The amount of additive is minimal, maybe 50 gallons per thousand of gas. Thus the gas you buy at Costco is exactly the same as at a brand name gas station excluding a 1-5% additive difference, and often 1-2%. Nevertheless the brand name stores must pay licensing and royalty fees to the brand name they operate under. Even the brand name stores must also purchase a certain % of gas from refineries belonging to the brand name. In contrast, Costco only orders from them if they’re the least expensive refinery.

This is why you almost never see brand unattended stations. Branded stores make their funds on the $1.99 overpriced bottle of coke, not from the gas. Even unattended, a branded station costs a lot more to use when compared to a Costco fuel station.

It also helps that Costco doesn’t take all charge cards, and so save millions in card processing fees.

How come other gasoline stations charge a lot more than Costco? There is certainly this misconception that Costco sells gasoline as being a loss leader to bring in more members.

Yes, they want to attract more members, but the company does not deliberately lose cash on the service stations. Costco buys their gasoline “off the rack” (Finding yourself in SoCal, I’ve seen invoices from Chevron, Valero, Arco, Shell, ExxonMobil), where most independent stations buy their fuel from as well, then add their own Kirkland Signature fuel additive. The purchase price is generally the spot market price, that is pretty competitive to what other gas stations are spending money on their inventory.

Depending on the location in the warehouse, they will likely usually comp shop 4 gasoline stations (branded and independent) inside a certain radius from the warehouse. Every morning, a staff member will drive around and get the prices from your 4 gas stations they comp shop on. The costs are put into the AS400, and corporate gas department will call and tell the warehouse how much the gas will sell for the day. A worker just must change the purchase price on the sign to mirror that prices which can be downloaded directly to the pumps.

The warehouses I worked at averaged 4 – 5 truckloads (approximately 8800 gallons each) per day, while the majority of the surrounding gas stations sell maybe 3 truckloads Per Week. (Don’t think that neighborhood gas stations usually do not make money selling gasoline) Depending on the area, you may have branded service stations that keep their price high, so Costco will surely make money on each gallon of gas even if they’re selling gas for 20-30-40 cents per gallon under the other gasoline stations. And then there are other gas stations which are aggressive on their own pricing, and Costco is not going to beat that price but just match it. The stations that are aggressively pricing their fuel continue to have a decent margin on their own product, in order that particular Costco is still making money on each gallon of gas sold, albeit a smaller amount than a Costco location with competing gas stations which are not as aggressive on the pricing. The majority of the neighborhood gas stations that aggressively price their fuel usually do not take charge cards. For the typical Costco member, the gasoline remains cheaper at Costco simply because they use their Costco bank card having a 4% rebate on gasoline.

The sole time i have encountered where we deliberately had to sell gasoline confused was during sudden spikes in gas prices. Since Costco turn their fuel inventory so quickly, each new delivery on the same day could be greater than the previous delivery earlier in the day. The area service stations continue to be selling gas they bought 72 hours (even per week) ago, but now we’re selling gasoline at the same price or just slightly lower than the neighborhood gas station is selling but in a higher acquisition cost. During the times of price volatility, comp shops of competing neighborhood service stations may be completed repeatedly a day to find out if the other ewgoqq stations may have adjusted their prices. Costco may and can adjust their price in the midst of the day to account for competitors’ price changes and to minimize losses.

Now, it really works inversely as well. Since the gas prices inside the wholesale market begin to drop, each subsequent load of gasoline is cheaper compared to one received the day before or even earlier in the day. Because the neighborhood gasoline stations continue to have gas they bought at a very high price, they haven’t drop their prices yet, and Costco can start lowering prices and still make decent margins on each gallon of gas.

The service station, just like one other “ancillary businesses” (pharmacy, food court, tire center, photo center, meat, bakery, optical, service deli) in the ware