CNN

Here’s why gas is so cheap at Costco and Walmart

Nov 20, 2021, 3:55 PM
SAN LEANDRO, UNITED STATES - 2021/10/16: A driver pumps gas at a gas station of Costco in Californi...
SAN LEANDRO, UNITED STATES - 2021/10/16: A driver pumps gas at a gas station of Costco in California. In the United States, a lot of drivers like pumping gas at a gas station of Costco because its price is always lower than other gas stations. In the recent months, the gas price of Costco gas station was increased at the same time, the gas prices around the United States also increased and some drivers felt helpless. (Photo by Michael Ho Wai Lee/SOPA Images/LightRocket via Getty Images)
(Photo by Michael Ho Wai Lee/SOPA Images/LightRocket via Getty Images)

 (CNN) — Gas prices are skyrocketing, and Americans want to save at the pump. That plays right into the hands of Costco, BJ’s Wholesale Club and Sam’s Club.

The national gas price average jumped to $3.41 a gallon Friday, according to AAA, 61% higher than the average at the same time last year. The Biden administration has called for an investigation into whether oil and gas companies acted illegally to push up prices.

The spike has pushed more shoppers to rely on these chains to fill up their tanks, say the companies, retail analysts, and fuel experts. Gas prices at warehouse clubs can be as much as 30 cents lower than traditional gas stations, and the chains offer members coupons to use in their stores when they fill up. Gasoline sales at the warehouse clubs are an important part of their business and draw customers inside.

“People are seeking out the clubs because of the gas,” said Michael Baker, a retail analyst at D.A. Davidson. “It’s US consumers’ nature to go out of their way for lower gas prices.”

Costco, for example, is typically 20 cents a gallon below the market average, according to Tom Kloza, the global head of energy analysis at IHS Markit’s Oil Price Information Service. BJ’s says it’s 10 cents below average.

These companies are “winners when gasoline prices go skyward,” said Kloza.

Costco, Sam’s Club and BJ’s want you to fill up your tank in their parking lots and then go stock up on giant jugs of ketchup, boxes of snacks and clothing. (And why not buy a flat-screen TV or a new couch while you’re at it?) Their gas stations give these warehouse stores an advantage that many retail competitors can’t match.

Gas makes up around 10%, $20 billion annually, of Costco’s overall sales and 9% of BJ’s. Walmart, which owns Sam’s Club, does not disclose what portion of its sales come from gas.

Gas is a notoriously low-margin business, but retailers can make money from selling huge volumes of gas — even while charging much less than independent gas stations, said Kloza, adding that it’s not unusual for sales at a Costco location to reach up to 1 million gallons a month compared to an average of 80,000 gallons a month at typical gas stations.

Despite their big-brand names, the vast majority of Exxon, Chevron, BP and Shell gas statons are independently owned, so they aren’t able to make a volume play like wholesalers do. Although wholesalers are able to make a profit on gas, they’re not making much: Costco, for example, reported that gasoline has a lower profit margin than the rest of its business. Rising gas prices typically help Costco’s sales, but hurt its profits.

“When there are inflationary pressures and prices are going up, people look to save on gas,” said Richard Galanti, Costco’s chief financial officer. For every 100 people who come to Costco to fill up on gas, more than half go shop inside afterwards, he said.

Gas sales at BJ’s Wholesale Club jumped 20% during its most recent quarter ending October 30 compared with the same time a year ago.

BJ’s is growing market share in gasoline “in leaps and bounds,” CEO Robert Eddy said on a call with analysts Thursday. When gas prices hit over $3 a gallon, “members love us” and shift their gas spending to the club.

Gas discounts are a tool Walmart uses to encourage customers to sign up for Walmart+ memberships, which also offer free shipping and discounts on prescriptions.

Walmart said on Tuesday that it’s actively trying to keep gas prices down to attract customers worried about how much they’re paying at the pump, especially as federal stimulus benefits wane.

“Gas prices are a concern….They’re up dramatically versus a year ago,” Walmart CEO Doug McMillon said on an earnings call. “The customers had money [then]. And at some point, that’s going to come to an end.”

Today’s Top Stories

CNN

A car crashed into an Apple store in Hingham on Monday. Photo credit: WBZ....
Amir Vera, Michelle Watson and Paul LeBlanc, CNN

1 dead, at least 19 injured after car drives through Massachusetts Apple store

Authorities in Massachusetts say one person was killed nearly 20 others were injured Monday after a vehicle drove through an Apple store.
9 days ago
LGBTQ club shooting...
Elizabeth Wolfe, Holly Yan and Amanda Watts, CNN

Police have identified the 5 people killed in Colorado Springs LGBTQ club shooting

    (CNN) — [Breaking news update, published at 5:55 p.m. ET] Police have identified the deceased victims of the Colorado Springs shooting as Raymond Green Vance, Ashley Paugh, Kelly Loving, Daniel Aston and Derrick Rump. A news conference about the shooting is ongoing. Related: The Beehive State reacts to Colorado LGBTQ+ nightclub shooting [Previous story, published […]
9 days ago
COLORADO SPRINGS, COLORADO - NOVEMBER 20: People hold a vigil at a makeshift memorial near the Club...
CNN

Mass shooting at a Colorado Springs LGBTQ club leaves 5 dead and destroys a coveted sense of safety

The shooting an at LGBTQ+ club in Colorado Springs destroyed a building sense of safety in communities around the world.
9 days ago
Whole Roasted Turkey Dinner For Thanksgiving with All the Sides (Adobe stock)...
Vanessa Yurkevich, CNN Business

Thanksgiving dinner will cost 20% more this year because of inflation

A feast for 10 with 12 menu items including a turkey, stuffing, cranberries, and pumpkin pie mix will cost $64.05 on average — up $10.74 from last year. That breaks down to about $6.50 per person, according to the annual survey.
9 days ago
Philip and Rachel Ridgeway have had twins born from embryos that were frozen for 30 years. 

Permis...
Jen Christensen and Nadia Kounang, CNN

Parents welcome twins from embryos frozen 30 years ago

The embryos were created for an anonymous married couple using in-vitro fertilization. The husband was in his early 50s, and they used a 34-year-old egg donor.
9 days ago
two more utahns have been arrested, US capitol attack commission...
By MICHAEL KUNZELMAN Associated Press

Man gets jail for joining Capitol riot after Tinder date

A Delaware man owner has been sentenced to 30 days of incarceration for storming the U.S. Capitol after seeing it on a Tinder date's television and taking an Uber ride to join the mob's attack, court records show.
10 days ago

Sponsored Articles

Happy joyful smiling casual satisfied woman learning and communicates in sign language online using...
Sorenson

The best tools for Deaf and hard-of-hearing workplace success

Here are some of the best resources to make your workplace work better for Deaf and hard-of-hearing employees.
Team supporters celebrating at a tailgate party...
Macey's

8 Delicious Tailgate Foods That Require Zero Prep Work

In a hurry? These 8 tailgate foods take zero prep work, so you can fuel up and get back to what matters most: getting hyped for your favorite
christmas decorations candles in glass jars with fir on a old wooden table...
Western Nut Company

12 Mason Jar Gift Ideas for the 12 Days of Christmas [with recipes!]

There are so many clever mason jar gift ideas to give something thoughtful to your neighbors or friends. Read our 12 ideas to make your own!
wide shot of Bear Lake with a person on a stand up paddle board...

Pack your bags! Extended stays at Bear Lake await you

Work from here! Read our tips to prepare for your extended stay, whether at Bear Lake or somewhere else nearby.
young boy with hearing aid...
Sorenson

Accommodations for students who are deaf and hard of hearing

These different types of accommodations for students who are deaf and hard of hearing can help them succeed in school.
Young woman receiving laser treatment...
Form Derm Spa

How facial plastic surgery and skincare are joining forces

Facial plastic surgery is not only about looking good but about feeling good too. The medical team at Form Spa are trained to help you reach your aesthetic outcomes through surgery and through skincare and dermatology, too.
Here’s why gas is so cheap at Costco and Walmart