This is how America’s cheapest gas retailer keeps its Cost-co so low.
With Middle East tensions sending gas prices surging, shoppers have turned to an albeit inconvenient source for a low-cost refill — Costco.
The Big Box store’s discount fueling stations, where gas on average runs 30 cents cheaper than the local diesel dispenser, have experienced their greatest demand for gas in 50 years as customers look to fill their tanks sans emptying their wallets, CNN reported.
Costco CEO Ron Vachris said that all “three four-week fiscal periods of the quarter set successive all-time company volume sales records, with the final five weeks for the quarter becoming our top five volume weeks ever.”
Some stations even had to call in tanker trucks several times per day to stay stocked while people have been willing to drive further and wait in line longer for gas.
In a recent pic on Reddit, one exasperated customer showed a line of cars snaking away from the Costco fill-up station at 11 a.m. like a Mexico border checkpoint.
“This pic doesn’t even do it justice as there is a whole ass lone wrapping around the store,” they said. Others reported wait times of between 20-30 minutes.
Vachris cited “events in the Middle East” as a main driver for this influx of pump pilgrims, referencing how energy markets were thrown into flux by the Iran war.
This turmoil sent gas prices soaring past $4 a gallon around the US as global oil supplies were impacted by the shuttering of the Strait of Hormuz, which sent crude prices above $100 a barrel.
How is Costco offer such a discount on diesel?
The retail giant generally makes less money per gallon than the average mom-and-pop operation. But unlike the parochial pump stop, they are able to drive profit through sheer volume — they have 747 gas stations — like with the rest of their goods, from hot dogs to dinner rolls.
They also bank on membership models with the corresponding fees, making up nearly 60% of Costco’s profit.
To keep its members happy, Costco can survive on small gas profit margins, unlike the local petroleum purveyor, according to Reader’s Digest.
By contrast, rival gas stations need to institute a higher markup to cover overhead and repairs.
The catch-22, when gas prices go up, customers scale back their purchases, forcing them to not charge as much.
In accordance, higher gas prices mean less income for mom and pops.
With Costco, on the other hand, higher gas prices drive customers to the pump, allowing them to sell more gasoline. The downside is that the profit margin gets squeezed because it’s a low-margin good — the opposite effect of when prices are down.
Nonetheless, Costco makes out well overall, notably generating $2.3 billion more revenue in 2024 than in 2025 because prices were higher.
Plus, increased pump patronage has collateral benefits as well.
The record-breaking numbers of gas guzzlers have caused foot traffic at Costco warehouse to go up by 5%, thereby increasing the sales of other items.
“We believe this will drive even greater loyalty with these members in the future, as members who use our gas stations typically spend more with us in the warehouse,” said Vachris.
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