gas prices don't make sense ;-)

[yabob]

I had a Costco card for a year, and decided it wasn’t worth it. Part of that was the fact that they wouldn’t take my regular credit card at their gas pumps. Compared to lower priced independent gas stations, the difference in price was almost exactly the 2% cash back from the credit card.

BTW, independent gas stations that offer a discount over the big names generally keep their costs low by continually looking for refineries that have excess they can buy at discount on the spot market. Then, they just use a bog standard additive, rather than the proprietary ones used by the major brands. Around here, I usually go to “Rotten Robbie”. From their FAQ:

Q. Where does Rotten Robbie get their gas/diesel/oil ?

A. The vast majority of the products we buy are refined in one of the 5 Bay Area refineries (Chevron, Tesoro, Valero, Shell and Conoco-Phillips). We buy directly from these companies and from other sources who buy from or exchange product with these companies. Most of the crude oil refined in the SF Bay Area refineries comes from Alaska and California.

…

Q. Why are your prices cheaper than other stations ?

A. We operate on high volumes and low margins. As an independent marketer, we can buy from several different refiners and always try to buy at the most advantageous price.

…

Q. Is Rotten Robbie gas the same as the major brands ?

A. Basically, yes. The only difference is the additive that is used. The major refiners each have their own proprietary additive that they use. We use a generic additive that meets all the requirements of The California Air Resources Board (CARB), which are the same standards the majors refiners must also meet. All refiners exchange gasoline with each other and supply gasoline directly or indirectly to independent suppliers like Rotten Robbie. The additive is the last thing that is added to the fuel, which occurs at the time the fuel is loaded into the delivery truck.

Costco undoubtedly operates the same way. Plus, there is the factor that they make money from your upfront membership fee, which allows them to shave margins even more. This applies to everything Costco sells.

[tumbleddown]

@t-bonham@scc.net

Which is why many of those ‘gas’ stations dragged their feet on ‘pay at the pump’. They would have to pay money to install new pumps, which would make it easier for customers to skip coming inside the store and possibly be tempted into buying something else. Many stores only did this when competition with other stores forced them into it.

Actually, stations dragged their feet on pay at the pump installations because each one represents several thousand dollars in cost that had to be absorbed by the station owner. As mentioned, retail gasoline sales are not all that lucrative for the local station owners. A lot of independent station owners had to take out loans in order to convert their pumps.

As for Costco, here’s what they have going for them that allows them to offer a lower cost:

[ul]
[li]No advertising costs, on the corporate or individual location level. This alone amounts to a couple of cents per gallon.[/li][li]A single, nationally negotiated contract with a single gasoline provider, subcontracted down to local refiners associated with that provider. I’ve got some inside information here, as that gasoline provider happens to be my employer (they aren’t buying excess on the spot market at all) so I can’t mention any names, but I can say that the fuel that you purchase at Costco is from a company whose self-branded stations you pass every day, and not just in the U.S.[/li][li]As noted, minimal personnel costs. At stations outside of Oregon and New Jersey, they have only one employee who monitors the gas area for safety and cleanliness.[/li][li]Limited operating hours. Unlike a lot of convenience-store/gas stations, Costcos are open around 100 hours a week, rather than 168.[/li][li]No additional equipment issues. While vacuums and air pumps and car washes can be sources of revenue, they also require additional personnel, additional real estate and additional maintenance costs. Costco stations don’t even have squeegees for cleaning your windshield while you fuel up.[/li][li]Streamlined equipment nationwide. My employer’s stations have no fewer than 18 different kinds of gas dispensers, a half dozen styles of canopy, even 8 styles of garbage can. Costcos nationwide all have the same pumps, same canopies, same garbage cans, same fire extinguishers, even. That simplifies purchasing, disbursing and maintenance.[/li][/ul]

[curlcoat]

@Duckster

Costco gas pumps are semi-automated. Members insert their member/credit cards into the pumps and then pump their own gas. No cash accepted. Thus no need to have attendants, except for at least one person to supervise just in case there is an idiot customer. Of course, Oregon Costcos have attendants to pump the gas as required by law and that slows down the process at times.

This is the same thing as at our regular gas stations - we insert whatever card we want to use and pump our own gas. The only person working there is the guy behind the counter in the store.

@IAmNotSpartacus

That’s certainly not the case in the Los Angeles area. ARCO is usually 4-6 cents a gallon cheaper and Thrifty (owned by BP-- same parent as ARCO) is 6-9 cents cheaper.

Really? Wow, I guess I won’t make a point of finding a Costco up there there! OTOH, it seems like your average price is less, so maybe Orange country has those price fixing laws and LA doesn’t?

@yabob

Costco undoubtedly operates the same way. Plus, there is the factor that they make money from your upfront membership fee, which allows them to shave margins even more. This applies to everything Costco sells.

We paid for the membership fee? (My husband got the membership). Do we have to pay dues each year? This might change everything…hmmm…

[gonzomax]

The fee is 50 bucks a year. If you use it and like it, the cost can be irrelevant.
Our Costco gas prices are pretty much even with the neighborhood stations.

[AWB]

In Maryland, there’s a law that a gasoline retailer cannot sell for a rate less than the price that the state buys gas for their government-owned vehicles. This effectively kills any kind of loss leader setups.

[yabob]

@gonzomax

The fee is 50 bucks a year. If you use it and like it, the cost can be irrelevant.
Our Costco gas prices are pretty much even with the neighborhood stations.

50 bucks is for the base membership, which I had for a year. There’s other levels as well. I did find it curious that Costco gas here ran about 2% less than the Rotten Robbie in my neighborhood, which made the RR about the same factoring in the cashback on the credit card which Costco didn’t take. Rotten Robbie, in turn, runs a few percent cheaper than the majors.