People get gas at Costco on Fenton Parkway in San Diego on April 14. The chain is known for cheaper fuel, but factors like distance and wait times can affect how much drivers actually save.
Meg McLaughlin/TNSCostco gas is often cheaper than nearby stations, but the difference can be small — and sometimes nonexistent depending on location.The retailer keeps prices low by taking smaller margins on fuel and using membership fees and in-store sales to make up the difference.How much you actually save depends on distance, wait times and fees, which can eat into the lower price at the pump.
Californians love Costco: The state has more than twice as many warehouses per person as the U.S. overall, and it will soon be home to the first stand-alone Costco gas station. And as gas prices rise while the war in Iran continues, the wholesale retailer’s gas prices may be making it an even bigger draw, including in the Bay Area.
The average price of a gallon of gas was $6.29 in San Francisco and $6.26 in San Mateo County on Friday, according to AAA, both well above the state average of $6.06 — which ticked over $6 on Thursday for the first time in four years.
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But at the Costco gas station on El Camino Real in South San Francisco, a gallon of regular gas was only $5.69. The next-cheapest gallon you could get in San Francisco on Thursday was $5.79 at a Speedway Express and a Marathon, according to price comparison app GasBuddy. Across the Bay Area, Costco gas is typically 6 to 20 cents cheaper per gallon, though in some counties you can find gas at the same price as Costco or even a few cents cheaper at other stations.
“Costco tends to be one of the most aggressive competitors when it comes to prices,” said Patrick De Haan, GasBuddy’s head of petroleum analysis.
Costco achieves that in a few ways: It takes a lower profit margin on gas than competitors, said Doug Johnson, a spokesperson for AAA Northern California — around 14%, beneath the industry standard of 20% or higher. Costco also doesn’t need to fully staff it or maintain a convenience store on site like many stations do.
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Warehouse clubs buy gas in bulk, which also allows them to charge less thanks to economies of scale; and they benefit from the pure profit of membership costs as well as the expectation that you’ll be popping into the store to fill up your pantry and fridge after you fill your tank.
Costco knows its gas is a major draw for members. It’s capitalizing on that with plans to open its first-ever gas-only location in June in Mission Viejo (Orange County), with another slated to open in Hawaii in 2027. (Sadly, the inflation-proof $1.50 hot dog deal is not expected to be available on site.)
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But is Costco gas really always the cheapest? Often, yes, if you just go by the per-gallon price. And there’s extra appeal for drivers who are sensitive to quality: Costco sells only so-called Top Tier gasoline, which contains detergents that keep your engine running cleanly. A study from AAA found that gasoline that isn’t Top Tier leaves 19 times more engine deposits.
However: Personal finance is always personal. Filling up at Costco could cost you some extra time and money on top of the price tag to fill your tank. You need to factor in these variables and do the math to determine whether it’s the best choice for you.
Do a little comparison-shopping first
It’s worth it to check a tool like GasBuddy, AAA Mobile and Google Maps to see if there’s comparably priced or even slightly cheaper gas closer to you. Individual gas station owners typically set their own prices, Johnson said, and some mom-and-pop shops might give up some profit margin to draw customers, similar to Costco. He also said less-trafficked stations buy gas less frequently, so they may have purchased their supply before prices rose and can pass those savings onto customers — though as the war reaches the 2-month mark, most places have probably gone through that inventory.
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Factor in the Costco membership cost. If you buy a one-year Gold Star Costco membership for $65 exclusively to get gas, it could take a lot of fill-ups to make that back from what you save at the pump. Then again, if you only use your Costco membership to buy gas, you’re missing out on some other major savings. A few $5 rotisserie chickens, a couple bottles of Allegra, $10 pizzas for movie night, and feeding your family of four hot dogs and soda (or a water bottle) for $6 before your shopping trip will make up that difference pretty quickly.
• Read: Gas prices are rising fast in California. These small changes can help drivers save
• Read: Here’s how much the $1.50 Costco hot dog deal would cost if it kept up with inflation
Do the math on the distance
To make driving out of your way to fill up at Costco worth it, De Haan offered a rough formula for breaking even: If you drive a sedan, the gas at Costco needs to be at least a penny a gallon cheaper for each mile out of your way there and back, perhaps a bit less if you drive a hybrid with amazing fuel economy; 2 cents per gallon cheaper if you drive an SUV, potentially more the closer your fuel economy gets to single digits.
How this works out in practice: If the nearest Costco is 5 miles out of your way round trip, to make driving there in a typical SUV worth it, the gas would have to be around 10 cents cheaper per gallon than a proximate station just to break even. So if the Costco gas is 20 cents per gallon cheaper than your station down the street, you’re actually only saving 10 cents per gallon when you factor in the extra cost of the trip. (This assumes you weren’t already headed to Costco for other shopping needs, of course.)
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Look carefully at your membership and credit card rewards
If you have a Costco Executive membership ($130 annually), you get 2% rewards for everything you buy from Costco, including gas. A credit card with generic gas rewards would bump that up even further. But on the other hand, if you have a credit card with rewards for other station brands, or station-specific rewards through a different rewards membership program — AAA has one, as do many grocery chains — you could be leaving money on the table.
Consider your idling time
Many Costco gas station trips come with a long wait during crowded peak hours. A study on idling cited by the EPA found smaller cars waste 0.32 gallons per hour idling, while larger cars burn 0.71 gallons per hour. If you’re idling in a sedan waiting for the $5.69 gas at the South San Francisco Costco, you’re burning up 3 cents a minute; in an SUV that takes premium gas ($6.14 at that Costco on Friday), you’re losing 7 cents a minute.
How hungry are you for a deal, or dinner?
There’s also the value of your time. Yes, the extra savings for Costco gas might pencil out in your tank’s favor, but it might not be worth the extra driving and idling time. On the other hand, if you’re someone who gets a buzz off a good deal — or off an excuse to have a hot dog for dinner — it could be worth every second.