The Real Reason Why Costco's Gas Is So Cheap - YouTube

Costco is a shopper's paradise for consumers who want anything from rotisserie chickens

to 4-foot tall wine glasses.

A big draw for Costco shoppers isn't even found inside the store, though — it's at

the edge of the parking lot.

We're talking about the Costco gas pumps and the superstore's typically lower-than-average

gas prices.

The company's gas stations are incredibly popular, but just how do they manage to sell

their gas at a reported average of about 21 cents per gallon cheaper than competitors,

and are there times when filling up at Costco maybe isn't the best option?

For any doubters that Costco time and again is one of the cheapest places in the U.S.

to buy gas, check out these facts: The Oil Price Information Service conducted a survey

in 2017 and found that Costco regularly delivered cheaper gas than every major gas chain.

In 2018, Costco dropped to second place, but only below regional chain Food 4 Less, and

only by a fraction of a cent per gallon.

Business Insider reported in 2019 that when it came to chains offering the cheapest gas

in every state, Costco came out on top about 50 percent of the time.

There are essentially two ways that Costco is beating the competition when it comes to

the gas pump.

First off, Costco customers are very loyal and the company knows this and markets everything

under its roof — or in its parking lot — with this mindset.

Buying Costco gas, meat, socks, laptops, and all sorts of other products requires a membership,

and people want to make the most of that membership — so they get their gas at Costco.

On the flip side, those membership fees allow the company to offer goods and services at

lower prices.

It's a win-win.

"You don't have a membership?"

"No."

"Oh my God."

The second part of this strategy relies on the giant warehouse of goods beside the gas

station.

Customers who swing into Costco's parking lot to fill up on the cheap gas are also likely

to go inside the store to spend more money, which also allows Costco to price their gas

at less than the competition.

It's similar to why they sell hot dogs for a buck, only the gas isn't priced so low that

it becomes a loss leader.

After all, oil prices tend to be a little more volatile than hot dogs.

As for how Costco's cheap gas stacks up against the price of your Costco membership — this

is where things can get a little dicey.

A regular yearly membership at Costco will set you back $60 and you'll need to do a lot

of driving if fuel is the only reason you want that Costco membership card.

To come out on top you would need to fill up at least 35 times during the year, otherwise

you could lose money in the long run.

That's not the only downside to joining Costco just for the gas, either.

People regularly post their gripes about waiting in long lines for Costco gas on social media,

and some lines have had wait times of up to an hour.

The fact that they don't take cash may be confusing to newcomers and slow down those

fill-up lines even more.

Not everybody has a Costco right down the road from their house or work either.

So it's important to keep in mind that driving miles out of your way only to fill your tank

with Costco's cheap gas may be counterproductive if you're eating up those fuel savings just

to get to the pump.

None of this is to say that joining Costco for the fuel savings isn't going to be worth

it.

If you plan on taking advantage of the many benefits inside the store, do a fair amount

of driving, and don't mind sometimes waiting to buy gas — by all means, go for it.

There are, of course, other ways to save on gas, and plenty of grocery chains around the

United States offer various types of gas rewards programs.

Experts say that Monday is the cheapest day of the week to buy gas because of the old

rule of supply and demand going into effect on the days leading up to the weekend.

Couple that knowledge with your local grocery store's gas rewards program and a cheap gas-finding

app like GasBuddy, and you may just beat Costco at its own game.

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