How Costco Keeps Gas So Cheap

As Americans look to save money at the pump, many are turning to Costco. One analysis found Costco sells gasoline at about a 9-cent discount to major local competitors and roughly 24 cents below statewide averages. But cheap gas is just one part of Costco’s bigger strategy and a key driver of the company’s profitability. More on why Costco keeps gas prices so low at the link in bio. Costco typically sells gas at about a nine cent discount compared to its largest local competitors, and a roughly 24 cent discount to its statewide averages. The company operates on very thin margins, making only a couple of cents per gallon. It's to give members to keep coming back, because what Costco really wants is for you their membership card. In 2025, Costco generated more than $5 billion in membership fees for 2025, an amount equivalent to nearly 66% of its net income. That means Costco doesn't necessarily profit on gasoline the way its competitors do. It just needs to give members to keep paying the annual fee. It's similar to the strategy behind some of Costco's other famous bargains, like its $1.50 hot dog and soda combo. These products generate little or no profit on their own, but they give customers another reason to visit Costco and to keep renewing their memberships. Analysts estimate that 50% of customers who visit Costco for fuel also go inside the warehouse and its members typically spend nearly $3,190 a year at Costco. Other warehouse retailers, including BJ's and Sam's Club, employ a similar strategy. But in June, Costco took its strategy a step further by opening its first standalone member's only gas station. It is also expected to open a second standalone gas station in Hawaii in 2027. For Costco, gasoline isn't just another product to sell. It's another way for the company to earn its members loyalty.