Cheap Gas: Why Does Costco Have Lower Prices Than Other Stations?

Costco Gas Station stock photo
Fang Zheng /

As the Biden Administration recently banned all Russian imports of gas, oil, and energy, gas prices could continue to rise here in the states. Even though Russian oil accounts for only 3% of U.S. crude oil imports, demand for Russian oil in other countries is also driving up prices in the U.S.

See: How Much Does the President Control Gas Prices?
A History of Gas Prices: Do You Remember How Little You Once Paid?

As gas prices reach record highs of $4.3 per gallon, according to Reuters, Americans may be looking for cheaper ways to fill up. If you are a member of a warehouse club like Costco, you may be tempted to take advantage of their lower-than-average fuel prices. But is the price too good to be true?

This week in Santa Clara, California — where gas prices sit well above the national average at $5.45 per gallon — Costco is charging club members $4.82 per gallon, according to

How can retailers like Costco and Walmart offer such low prices for gas? Simple: Warehouse clubs have the volume and financial prowess to sell gas at rock-bottom prices (and razor-thin margins) as a way of luring customers in to buy other merchandise.

What’s more, membership sales make up 75% of the store’s profit. Costco, for instance, is banks on customers signing up for a membership card to get cheap gas. Then, once consumers have the membership, they are likely to look for ways to save money on everything from groceries to electronics.

Make Your Money Work for You

Explore: Newsom Proposes California Gas Rebate to Combat Rising Prices at the Pump
Learn: Could Surging Gas Prices Lead to Higher EV Sales? Here’s What You Should Know

Most gas stations are independently owned, meaning they aren’t big enough to order huge volumes at discounts the way wholesale clubs like Costco, BJ’s and Sam’s Club can. The wholesale clubs aren’t making much profit off gas. But they are betting that consumers will seek out their low gas prices, then enter their stores and spend money on other things.

That’s a pretty good bet when gas prices are as high as they are now.

More From GOBankingRates

Share this article:

Make Your Money Work for You

About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
Learn More