The Real Reason Costco Gas Is So Cheap

There are many reasons why people love shopping at Costco, from the great savings when buying items in bulk and getting a hot dog and soda for $1.50, to filling up their gas tank for cheap. Yes, you read that right: Costco gas is cheaper than many of the other places out there, putting it at the forefront of many people’s minds when they need to fill their car’s tank.

With that in mind, you might wonder, why is gas cheaper at Costco? To find out, we spoke with fuel experts and here’s what they had to say.

How Much Does Gas at Costco Cost?

Similar to gas prices anywhere, Costco gas prices vary at any given time. That said, one Reddit user posted a picture last week with gas prices at $3.63 for regular gasoline and $4.19 for premium. Although gas prices depend on a variety of factors such as the type, station and location, Costco has a track record of being cheaper than most other distributors.

According to CNN, gas prices at Costco are typically 20 cents cheaper per gallon than the market average. This might not seem like a lot at a glance, however, in a time when people are looking to save, this can make a huge difference for a lot of folks.

• Pro tip: Costco keeps the gas prices updated on their app, so you can see them before deciding to drive over to fill your tank.

Why Is Costco Gas So Cheap?

The real reason Costco gas is so cheap is because of its membership business model. To shop at Costco and fill up a tank at the mass retailer, one has to be a paid member. A Costco membership costs anywhere between $65 and $130 per year, depending on the type of membership you get. It is likely that the money that Costco gets from this membership fee allows them to lower the prices more than their competitors while also still making a profit.

That said, Costco doesn’t necessarily have the biggest profit margin when it comes to gas. “Costco does not pursue the same profit margin on its gasoline sales as other gas stations do,” says Mark James, interim director of the Institute for Energy and the Environment at Vermont Law and Graduate School. “In fact, there may be times when Costco is selling gas at or below cost, just so that it can bring customers into its store. It is akin to having the lowest price milk in the grocery store; the store might lose a little bit of money on the gallon of milk, but they are betting that they will make it up on everything else that you buy.”

How Is Costco Gas Different From Other Gas?

Costco is a TOP TIER gas station, a designation that, according to the TOP TIER website, indicates the gas at its stations meets a high-quality fuel performance standard that was developed and overseen by leading automotive manufacturers.

According to Costco’s website, “Kirkland Signature™ Gasoline contains five times the EPA detergent requirement in both regular unleaded and premium grades, and is formulated to clean your engine and help your vehicle run like new.”

Essentially, this means that the gas has higher amounts of additives, specifically detergents, designed to help keep your car engine cleaner and enhance its performance.

Is Costco Gas of Lesser Quality?

No, as mentioned above, Costco gas is actually great quality, as it is TOP TIER certified. There was even a study done by AAA that indicated that TOP TIER gas, such as the gas at Costco, was better for cars. The study found that non-TOP TIER gasoline caused 19 times more engine deposits than TOP TIER brands after just 4,000 miles of simulated driving.

Is Costco Gas a Good Deal?

All things considered, Costco gas is a good deal for those looking to save a bit of money on gasoline, especially if you’re already a member. You may find that over the course of the year, you’ve saved a nice chunk of change when filling up your tank at Costco compared to other retailers.

That said, gas prices across the board are subject to change and the deal won’t always be consistent. “Changing economic conditions also affect gasoline demand which is reflected in the price,” says James. “Less trucking and transportation of goods reduces demand and less personal travel during the summer driving season also leads to less demand.”

That said, if you don’t shop at Costco, you’ll have to invest in a membership so you might find that the money you break even in the end. Plus, if you’re driving further away to pump gas at a Costco than it could also be the money you’d save is being spent on the miles to get there in the first place.

About the Experts

• Mark James, interim director of the Institute for Energy and the Environment at Vermont Law and Graduate School.

Sources

• CNN: Here’s why gas is so cheap at Costco and Walmart (2021)

• Costco: Costco Gasoline Our Fuel Promise

• Costco: 7 Reasons to Fuel Up at Costco Gas Stations

• AAA Newsroom: AAA: Not All Gasoline Created Equal

The post The Real Reason Costco Gas Is So Cheap appeared first on Family Handyman.

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