Costco has shared that it is raising electricity prices more slowly than ever.
Basically, Costco takes a lower margin on gas sales while prices are going up, but it does so as they go down.
Former Costco CFO Richard Galanti defended that trend, discussing the warehouse club’s gas business during its second-quarter 2022 earnings call.
“As prices go up or down, they even go down a little, they don’t go down as quickly as they could, which gives us, in our opinion, the ability to do less and be more competitive,” he said.
Now, with fuel prices rising due to the Iran war, Costco’s current CFO, Gary Millerchip, has shared some important news about the company’s pricing strategy. He also shared how high fuel prices are driving the behavior of members.
READ ALSO: Why Costco’s gas prices won’t go up as quickly as regular gas stations
Shopping at Costco warehouses saves members money.
Costco’s prices were 21% lower than Walmart’s, which was used as the basis for a recent Consumer Reports survey of grocery prices.
Consumer Reports commissioned the study from Strategic Resource Group (SRG), a New York retail and grocery market research firm.
“When SRG compared the prices of baskets of items commonly purchased at regular grocery chains in six cities representing the region across the US, the difference between the highest and lowest price in each city was more than 33%. And when the comparison included warehouse clubs like Costco and specialty stores like Whole Foods, the price difference was even more important to the consumer,” said the buyer.
The study highlights Costco’s consistent price advantage across the US, showing how warehouse clubs keep prices low compared to major discount grocers.
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That means anything that entices Costco members to visit its warehouses saves money.
“Typically, we see about half of the members who will shop at the gas station will also shop at the store,” Millerchip said during Costco’s second-quarter 2026 earnings call.
University of San Diego economics professor Alan Gin believes the motivation behind Costco’s aggressive gas pricing strategy has to do with how Costco makes money.
“The majority of their revenue comes from memberships,” he told ABC News.
Gin says that up to 70% of Costco’s profits come from the $65 or $130 that customers pay for the right to shop at its warehouses.
“They can lose the chicken and the hot dogs, and now maybe even the gas, if that gets people to sign up for this membership,” Gin said.
“The national average price of gasoline rose 23.2 cents last week to $3.68 per gallon, according to GasBuddy data compiled from more than 12 million price reports covering more than 150,000 gas stations nationwide,” the gas price website reported.
Prices have been rising rapidly.
“The national average is up 80 cents from last month and is 66.1 cents more per liter than last year. The national average diesel price is up 34.0 cents last week and stands at $4.951 a litre,” GasBuddy said.
Costco is monitoring the situation.
“It’s early days to know what the long-term impact could be from the events in the Middle East at the moment. But in general, when electricity prices start to rise, then we tend to see our value proposition align better with members, just because it’s clear that we want to be the authority on gas prices,” Millerchip shared.
He also noted that high electricity prices are changing the behavior of members.
“And so when prices are higher, that will tend to cause members to maybe take an extra mile that may involve getting to the gas station because of the increased price they see there. But, obviously, we’ll have to see what happens with fuel prices in the coming months there,” he added.
Low gas prices have been a key part of Costco’s strategy for decades.
“Costco, for example, is usually 20 cents a liter below the market average,” Tom Kloza, global head of energy analysis at IHS Markit’s Oil Price Information Service told CNN.
In times of high electricity prices, consumers want to save.
“People are looking for clubs because of the gas,” Michael Baker, a retail analyst at DA Davidson told CNN. “It’s natural for American consumers to go out of their way to get lower gas prices.”
Related: Sam’s Club is addressing a problem that is a sore point at Costco
This story was originally published by TheStreet on March 17, 2026, where it appeared first in the Marketing section. Add TheStreet as a favorite source by clicking here.
