As the war in Iran rages on, hot dogs, free taste tests and rotisserie chickens are no longer the top attractions at Costco. People are arriving in droves these days for the cheapest gas in town.
As prices top $7 a gallon in California and hover on and off near $5 a gallon in other spots across the country, Costco says it has "experienced unprecedented demand" for gas. That's led to long lines and the need for tanker trucks to avoid running dry.
In its most recent earnings call, Costco CEO Ron Vachris said the war in the Middle East had “a significant impact on product supply and gas prices,” resulting in “record-breaking” sales volumes during the last five weeks of the quarter.
“Our gas team performed exceptionally well to manage this unprecedented demand, which requires multiple daily gas deliveries to many locations,” Vachris added. “The high consumer price sensitivity, which fueled these record volumes, also drove many members to use our gas stations for the very first time in the third quarter.”
Costco sells gas at a lower price than local gas stations, undercutting them by around 30 cents a gallon. So, how can they afford to undercut the competition?
Vachris said customers who pump gas at Costco also tend to spend more inside the store, so Costco entices customers with its gas pumps and they raise profits by buying numerous other things. Experts say Costco's business model allows it to sell gas at a lower profit margin than traditional gas stations, relying on its membership fees and scale for profit.
Drivers wait 30 minutes for Costco's cheap fuel amid global shortage - here's how they keep prices low https://t.co/PH3UNCzwjA pic.twitter.com/TPizNGWDdX
— New York Post (@nypost) June 1, 2026
Costco's gas stations drive foot traffic to its warehouses, where customers end up spending more on other products, such as rotisserie chickens.
Costco took advantage of the surge by extending discounts on meat and eggs to drive more customers into its warehouses during the high gas price period, aiming to build long-term loyalty. Overall, Costco has 747 gas stations, which brought in 10% of its overall sales last year.
Is cheaper gas worth the $65 cost of an annual membership? AOL reported that an analysis by Kiplinger estimates a Costco Gold member must fuel 260 to 1,300 gallons per year to break even with the cost of membership. "The math is similar for Sam’s Club and BJ’s, two warehouse clubs that offer members discounts at the pump," Kiplinger's reported.
