March 27, 2026
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Should Costco Be Opening Members-Only Gas Stations?
Costco is opening its first standalone gas stations that are only accessible to the warehouse club members amid a spike in gas prices tied to the Iran war.
The first standalone station will open in California in Mission Viejo in June. At 17,000 square feet with 40 pumps, it will be Costco’s largest gas terminal yet, according to USA Today.
At least one second stand-alone station is scheduled open in Honolulu in 2027, per C-Store Dive. Costco hasn’t publicly responded on the openings.
Costco opened its first gas station in 1995, 12 years after opening its first store. In its last fiscal year, 747 of its 914 warehouses global had a gas station, with gas making up about 10% of total sales.
With prices often 5 cents to 40 cent below nearby competitors, Costco’s gas stations have been seen as traffic drivers to bring customers to their warehouse clubs. As March 26, GasBuddy data — according to CNBC — showed regular gas prices in various regions:
- Los Angeles: Costco, $5.39, traditional gas station per gallon, $5.95.
- Chicago: Costco, $4.29; traditional gas station per gallon, $4.48.
- Rochester, New York: Costco, $3.71; traditional gas station per gallon, $3.91.
In its fiscal second quarter ended Feb. 15, Costco’s gas comps were negative mid-single digits, driven by mid to high single-digit price deflation partially offset by gallon growth.
However, gas prices have spiked since U.S. and Israeli forces attacked Iran on Feb. 28. On Friday, the average U.S. gas price held at $3.98 per gallon, up from $2.98 cents a month ago and $3.16 a year ago, according to AAA.
Higher Gas Prices Can Be Favorable for Costco
Former Costco CFO Richard Galanti in 2022 said rising gas prices often lead to better fuel margins for Costco. Following general industry practices, when gasoline prices fall, Costco does not lower prices at the same pace it raises them when prices are climbing, he explained.
On a quarterly call on March 5, five days after the Iran war started, Gary Millerchip, Costco’s CFO, told analysts that when gas prices rise, fuel becomes a bigger traffic driver for Costco. He noted that “about half” of its members who use the Costco gas station will also make a purchase at the warehouse.
Millerchip said, “Generally speaking, if gas prices start to increase, then we tend to see our value proposition resonate better with members, just because obviously we want to be the pricing authority on gas. And so when prices are higher, that will tend to cause members to maybe take the extra mile that it might involve to get to the gas station because of the incremental value they see there. But, obviously, we will have to see what happens with gas prices over the coming months there.”
BrainTrust
Pamela Kaplan
Principal, PK Consulting
Neil Saunders
Managing Director, GlobalData
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Recent Discussions
Discussion Questions
What’s behind Costco’s strategy to open stand-alone gas stations? Is it a smart move?
Do you see Costco overall enjoying a big benefit should gas prices remain inflated?
Poll
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Anyone who has been to a Costco knows that the gas station is one of the most crowded areas, often with long lines that back up into the parking lot and cause snarls. A fair proportion of visitors are there just for gas. It makes sense, therefore, to have stand-alone stations in select areas both to take the pressure off store-based sites and to give the customer more convenience. This being Costco, it does not have to fear that such a move will reduce traffic to its stores: they are magnets in their own right.
It’s a good strategy on two fronts – current Costco members are reminded of their benefits and why they joined, and its an opportunity for Costco to grow their highly profitable membership base. Potential new members doing the quick math on joining for access to gas stations is if each fill trip saves them $6-$7 over other stations, annual membership is paid for in only 10 trips. Plus they get access to warehouse deals, a win.
As Neal noted, there are a lot of logistical reasons for simply relocating the existing store sites off site. Perhaps a more meaningful question is: should they go beyond s simple one-for-one replacement and actually open up a network of stations? (I’ll not venture there, for now, beyond noting that the members only policy might become much more of an issue with such a concept, removed from the tradtional customer base.)
I think it’s a great idea, and the timing couldn’t be better. This may attract new customers who will convert to shopping in the stores, who may not have otherwise.
This is a great idea. It would make it more convenient instead of driving 20 miles to get to my nearest Costco for gas. I do not think it would affect the normal traffic at Costco stores- just less waiting at the pumps, hopefully.
I have been a Costco member for a long time and have never purchased gas there. Mostly because of the reasons Neil stated in his comment. But I think stand alone gas stations for Costco are a good idea, and not just because of the savings. It’s also a smart way to increase membership.
As noted by several comments, this is a terrific idea. Besides extending the franchise, it offers members the added benefit of convenience. These stand-alone Costco fuel depots might conceivably allow Costco to develop a CStore business model.
Costco’s move to open stand-alone, members-only gas stations is very consistent with the core economics of the wholesale club model—and strategically, it makes a great deal of sense. Costco is reportedly opening its first standalone fuel-only location in Mission Viejo, California, with 40 pumps and plans for additional sites, including another large standalone station in Hawaii. Analysts suggest this could become a template for future expansion, particularly as Costco leans further into fuel as a value driver for members.
From a wholesale club perspective, this strategy aligns directly with the format’s philosophy: grow and retain members by reinforcing value. Costco typically sells fuel about $0.20 per gallon below competitors, and those savings alone can effectively offset the annual membership fee for many customers. In fact, fuel is not just an add-on—it’s a traffic and loyalty driver. Roughly half of members who fill up also shop inside, reinforcing the broader value proposition. That dynamic makes standalone fuel stations particularly compelling: they expand Costco’s reach, reinforce value perception, and create new opportunities to drive membership growth—even in areas without room for a full warehouse.
Higher gas prices may actually amplify this advantage. When fuel prices rise, consumers become more price-sensitive and more willing to seek out lower-cost options—something that historically benefits Costco. Analysts note that rising gas prices often drive more customers to Costco fuel and support membership growth and renewals, since the savings become more meaningful. This reinforces the broader wholesale club strategy: the goal is not maximizing margin on fuel, but strengthening member loyalty and long-term retention.
Ultimately, this move fits squarely within the wholesale club playbook. Costco—and the club format broadly—makes most of its profits from membership fees rather than product margins, allowing it to aggressively price key traffic-driving categories like fuel. Any product or service that reinforces value perception—especially something as visible and frequently purchased as gasoline—supports that model. Stand-alone fuel stations simply extend that philosophy beyond the warehouse footprint, making the strategy both logical and potentially very effective.
My first question: What percentage of gas purchased is from non-members? A members-only station could ease traffic at the pump for members and also incentivize non-members to join. It doesn’t take much to get to “break-even” with a paid Costco membership. It appears to be a good decision. I’m surprised it’s taken this long.
Why not make the gas station open to all, and simply have 2-tiered pricing? Members get the Costco price and non-members get the market price. I buy gas at the gas station attached to my grocery store. My grocery points add up to gas discounts. When I want to redeem my grocery points, I simply flash my grocery card. Painless. At a Costco station, a non-member who pays the market price a couple of times is quickly thinking about how far away the closest Costco is and why didn’t they sign up a long time ago…???
An even better marketing tactic than any signage would ever do. Customers will see the pump price difference every time and confirm/act on their own.
This is just another benefit bestowed on members, and adding more locations via the gas station is a great way to expand the value offered and (most likely) add more members. There is nothing critical to be mentioned here about this strategy-the more the merrier!
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Anyone who has been to a Costco knows that the gas station is one of the most crowded areas, often with long lines that back up into the parking lot and cause snarls. A fair proportion of visitors are there just for gas. It makes sense, therefore, to have stand-alone stations in select areas both to take the pressure off store-based sites and to give the customer more convenience. This being Costco, it does not have to fear that such a move will reduce traffic to its stores: they are magnets in their own right.
It’s a good strategy on two fronts – current Costco members are reminded of their benefits and why they joined, and its an opportunity for Costco to grow their highly profitable membership base. Potential new members doing the quick math on joining for access to gas stations is if each fill trip saves them $6-$7 over other stations, annual membership is paid for in only 10 trips. Plus they get access to warehouse deals, a win.
As Neal noted, there are a lot of logistical reasons for simply relocating the existing store sites off site. Perhaps a more meaningful question is: should they go beyond s simple one-for-one replacement and actually open up a network of stations? (I’ll not venture there, for now, beyond noting that the members only policy might become much more of an issue with such a concept, removed from the tradtional customer base.)
I think it’s a great idea, and the timing couldn’t be better. This may attract new customers who will convert to shopping in the stores, who may not have otherwise.
This is a great idea. It would make it more convenient instead of driving 20 miles to get to my nearest Costco for gas. I do not think it would affect the normal traffic at Costco stores- just less waiting at the pumps, hopefully.
I have been a Costco member for a long time and have never purchased gas there. Mostly because of the reasons Neil stated in his comment. But I think stand alone gas stations for Costco are a good idea, and not just because of the savings. It’s also a smart way to increase membership.
As noted by several comments, this is a terrific idea. Besides extending the franchise, it offers members the added benefit of convenience. These stand-alone Costco fuel depots might conceivably allow Costco to develop a CStore business model.
Costco’s move to open stand-alone, members-only gas stations is very consistent with the core economics of the wholesale club model—and strategically, it makes a great deal of sense. Costco is reportedly opening its first standalone fuel-only location in Mission Viejo, California, with 40 pumps and plans for additional sites, including another large standalone station in Hawaii. Analysts suggest this could become a template for future expansion, particularly as Costco leans further into fuel as a value driver for members.
From a wholesale club perspective, this strategy aligns directly with the format’s philosophy: grow and retain members by reinforcing value. Costco typically sells fuel about $0.20 per gallon below competitors, and those savings alone can effectively offset the annual membership fee for many customers. In fact, fuel is not just an add-on—it’s a traffic and loyalty driver. Roughly half of members who fill up also shop inside, reinforcing the broader value proposition. That dynamic makes standalone fuel stations particularly compelling: they expand Costco’s reach, reinforce value perception, and create new opportunities to drive membership growth—even in areas without room for a full warehouse.
Higher gas prices may actually amplify this advantage. When fuel prices rise, consumers become more price-sensitive and more willing to seek out lower-cost options—something that historically benefits Costco. Analysts note that rising gas prices often drive more customers to Costco fuel and support membership growth and renewals, since the savings become more meaningful. This reinforces the broader wholesale club strategy: the goal is not maximizing margin on fuel, but strengthening member loyalty and long-term retention.
Ultimately, this move fits squarely within the wholesale club playbook. Costco—and the club format broadly—makes most of its profits from membership fees rather than product margins, allowing it to aggressively price key traffic-driving categories like fuel. Any product or service that reinforces value perception—especially something as visible and frequently purchased as gasoline—supports that model. Stand-alone fuel stations simply extend that philosophy beyond the warehouse footprint, making the strategy both logical and potentially very effective.
My first question: What percentage of gas purchased is from non-members? A members-only station could ease traffic at the pump for members and also incentivize non-members to join. It doesn’t take much to get to “break-even” with a paid Costco membership. It appears to be a good decision. I’m surprised it’s taken this long.
Why not make the gas station open to all, and simply have 2-tiered pricing? Members get the Costco price and non-members get the market price. I buy gas at the gas station attached to my grocery store. My grocery points add up to gas discounts. When I want to redeem my grocery points, I simply flash my grocery card. Painless. At a Costco station, a non-member who pays the market price a couple of times is quickly thinking about how far away the closest Costco is and why didn’t they sign up a long time ago…???
An even better marketing tactic than any signage would ever do. Customers will see the pump price difference every time and confirm/act on their own.
This is just another benefit bestowed on members, and adding more locations via the gas station is a great way to expand the value offered and (most likely) add more members. There is nothing critical to be mentioned here about this strategy-the more the merrier!