When your fuel gauge hovers close to empty, you might choose a gas station that offers rewards or boasts great snack options. Alternatively, you might head to your nearby Costco or Sam’s Club to take advantage of their slightly lower fuel prices.
But how can those warehouses keep their prices so much lower than your other favorite fueling spots?
According to Patrick De Haan, GasBuddy’s petroleum analysis lead, these stores offer reduced fuel margins to attract customers to their retail locations.
Essentially, Costco and Sam’s Club use “gasoline as the catalyst to get people” to their warehouses, he explained.
“The goal is to lure you in,” De Haan explained. “Often, while refueling at Costco, customers think, ‘I might as well shop inside since I have a few items to buy.’ Customers then enter, often spending more on items with higher profit margins.”
De Haan continued, noting that the retailers aren’t losing any money on gas.
Costco’s beloved hot dog combo works in relatively the same fashion. Since the hot dog and soda meal was introduced in the mid-1980s, it has maintained its $1.50 price tag. As long as customers are coming into warehouses and shopping for other higher-priced items, the hot dog and fountain soda is a worthwhile promotion for Costco. The same can be said for its rotisserie chicken.
The volume of gasoline Costco and Sam’s Club warehouses purchase also helps to offset the costs, oil industry consultant Andrew Lipow previously told Nexstar’s NewsNation.
De Haan previously told Consumer Reports that gas at warehouse stations is typically anywhere between 5 cents and 25 cents cheaper per gallon than at other nearby gas stations.
“And when prices rise, they hold their prices down for longer,” he added.
While the prices may be relatively similar between the two companies, the type of gas varies.
Both offer unleaded, premium, and diesel fuels (here’s how to know which you should be getting), only Costco offers Top Tier fuel.
The fuel, according to Top Tier, is intended to keep engines cleaner by reducing deposit buildup on injectors and intake valves. A 2016 study by AAA found that Top Tier gasoline keeps engines 19 times cleaner.
“Yes, Top Tier gas is worth the extra money,” CarFax reported. “The benefits are not a myth.”
