In its 50-year history, Costco has never seen such demand for gas.
Many of its stations have been so overwhelmed that they’ve had to call in tanker trucks multiple times a day to avoid running dry, Costco said this week during its quarterly earnings call. A growing number of customers are buying just enough to top up their tanks, concerned about what tomorrow’s prices may be.
As prices have surged above $4 nationwide – and above $6 along the West Coast – Costco has become America’s destination for cheap gas. Well, relatively. Costco routinely undercuts local gas stations by around 30 cents a gallon.
That’s an enticing bargain at any time, although long lines sometimes dissuade customers, especially when gas is inexpensive. Not now: A significant number of Costco members filled up for the very first time over the past three months, Costco said on that earnings call.
How – and why – does Costco sell gas for so cheap? It’s all about chickens. Well, kinda.
Not a ‘loss leader’
Costco actually makes a profit on gas – a few cents per gallon. That’s substantially lower than the 25- to 35-cent markup that most gas stations take.
Unlike most gas stations, which are small, independently owned and operated businesses – maybe with an attached convenience store or a repair shop – Costco can rely on its massive scale and membership model to drive profit.
Last year, membership fees accounted for roughly two-thirds of the company’s profit. Costco sells most of its products the same way it sells gasoline: at or just above cost – and sometimes below, like its famous $1.50 hot dog and soda deal.
Competing gas stations need the markup to pay for overhead and repairs. When gas prices rise, customers buy less of it, keeping a relative cap on the amount they’re able to charge.
That’s why, ironically, when gas prices are high, most gas stations struggle to make money.
Costco has a different problem: When gas prices are high, Costco sells more gas. But, because gas is among its lowest-margin products, the company’s overall profit margin gets squeezed. The opposite is true when prices are low.
Last year, when prices spent a considerable amount of time under $3 a gallon on average, gas added about a tenth of a percentage point to the company’s gross margin. Last quarter, gas subtracted two tenths of a point.
Nevertheless, it’s a good problem to have. Costco said it brought in $2.3 billion less in gas sales in 2025 than the year before because prices got cheaper.
Costco has 747 gas stations, which brought in 10% of its overall sales last year.
-CNN
Many of its stations have been so overwhelmed that they’ve had to call in tanker trucks multiple times a day to avoid running dry, Costco said this week during its quarterly earnings call. A growing number of customers are buying just enough to top up their tanks, concerned about what tomorrow’s prices may be.
As prices have surged above $4 nationwide – and above $6 along the West Coast – Costco has become America’s destination for cheap gas. Well, relatively. Costco routinely undercuts local gas stations by around 30 cents a gallon.
That’s an enticing bargain at any time, although long lines sometimes dissuade customers, especially when gas is inexpensive. Not now: A significant number of Costco members filled up for the very first time over the past three months, Costco said on that earnings call.
How – and why – does Costco sell gas for so cheap? It’s all about chickens. Well, kinda.
Not a ‘loss leader’
Costco actually makes a profit on gas – a few cents per gallon. That’s substantially lower than the 25- to 35-cent markup that most gas stations take.
Unlike most gas stations, which are small, independently owned and operated businesses – maybe with an attached convenience store or a repair shop – Costco can rely on its massive scale and membership model to drive profit.
Last year, membership fees accounted for roughly two-thirds of the company’s profit. Costco sells most of its products the same way it sells gasoline: at or just above cost – and sometimes below, like its famous $1.50 hot dog and soda deal.
Competing gas stations need the markup to pay for overhead and repairs. When gas prices rise, customers buy less of it, keeping a relative cap on the amount they’re able to charge.
That’s why, ironically, when gas prices are high, most gas stations struggle to make money.
Costco has a different problem: When gas prices are high, Costco sells more gas. But, because gas is among its lowest-margin products, the company’s overall profit margin gets squeezed. The opposite is true when prices are low.
Last year, when prices spent a considerable amount of time under $3 a gallon on average, gas added about a tenth of a percentage point to the company’s gross margin. Last quarter, gas subtracted two tenths of a point.
Nevertheless, it’s a good problem to have. Costco said it brought in $2.3 billion less in gas sales in 2025 than the year before because prices got cheaper.
Costco has 747 gas stations, which brought in 10% of its overall sales last year.
-CNN
