If you’re a Costco member, you might like the fact that gas at warehouse retailers is often a lot cheaper than what you’ll find at many other gas stations.
However, there are situations where Costco gas may lose a bit of its price advantage, at least for a period.
As it turns out, Costco admits that it doesn’t always lower gas prices as quickly as possible.
During the retailer’s fourth-quarter earnings call, Richard Galanti, Costco’s chief financial officer, acknowledged the practice, saying the way the company buys and prices gas helps it make a little extra profit. He adds that other supermarkets and discount retailers have used similar strategies when it comes to fuel prices:
“(T)hey didn’t go down as fast as he could, which gives us, in our view, the ability to produce a bit more and still be the most competitive, in fact, in our view, getting a bit wider. So I think overall gasoline as a retail business has become more profitable in recent years.”
Before you grumble about this tactic, you might want to hear Galanti explain what Costco is doing with this extra gas advantage.
In an earnings call for the first quarter of 2023, Galanti said that as Costco produces more fuel, the retailer can keep the prices of its other merchandise lower. He noted:
“And of course, that helps us use some of that to continue to keep prices where we can on some things.”
Of Costco’s $220 billion in annual sales, about $30 billion comes from gas sales, prompting Galanti to call it “the great kahuna of them all”.
The lesson for Costco members is that they shouldn’t assume that Costco gas is automatically the best deal in town. For more information on how to save money on gas, see:
