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Costco lures in new club members with cheaper gas

Competitors wonder if savings worth the wait

Costco gas lines in Orem have been consistently long since prices jumped to nearly $3 a gallon after Hurricane Katrina.
Costco gas lines in Orem have been consistently long since prices jumped to nearly $3 a gallon after Hurricane Katrina.
Stuart Johnson, Deseret Morning News

OREM — Gasoline prices — we love to hate them.

At $2.77, $2.85, even $2.93, paying at the pump turns into pain at the pump, yet it's not just drivers who are feeling the strain.

"The people that I talk to who own convenience stores, it's the toughest they've ever seen it financially," said Bill Faulkner, owner of Will's Pit Stop and Will's Canyon Stop in Orem. "For the past month, with the hurricane stuff, we just go day to day, selling gas at cost or below."

Faulkner said he checks the cost of buying gas from the refinery each day, then determines prices accordingly. If the prices have jumped, he can either raise his selling price and risk losing customers or keep the price the same and instantly lose a few cents per gallon.

However, it's not just supply costs that are cramping Faulkner — it's the competition down the street.

Costco, the whole-sale distributor, has taken a large number of Faulkner's former customers, luring them with cheaper gas, he said.

"The independent stations will never be able to compete and sell gas (like Costco)," Faulkner said.

He said he sees people lining up at Costco, often waiting 45 minutes to fill up their tanks — something that to him doesn't make sense.

A sale of 20 gallons at a lower whole-sale gas vendor like Costco or Smiths might only bring $1.60 in savings, he pointed out.

"Is $1.60 worth waiting in line for 45 minutes to an hour?" Faulkner asked. "Not for me."

However, Costco said its sales have been steady since the gas price jumps, and on Thursday, they had almost 2,500 cars chug through its Orem station.

However, those who want the cheaper gas, which on Friday at Costco was $2.72 (Faulkner's was $2.79), must be members of the club.

"We're seeing a good increase in normal membership base, so it's hard to tell how many (new members) are for gas," said assistant Costco manager Gary Haynes. "(But) we are getting people that come up daily, signing up for memberships so they can purchase gas."

And with such a large member of customers, Costco has to be able to provide the petroleum in bulk.

"Obviously, like anything else, the quantity that we buy helps keep costs down," Haynes said. "We go through so much gas . . . but we buy it on the open market, just like most other stations do. We try to get the lowest price."

Although other service stations may not be worried about whole-sale distributor competition, fluctuating gas prices are enough to deal with on their own.

"We're just waiting, like others, to see what this other hurricane does," said Cullen Sullivan, who works at Mike's Chevron in Orem. "We'll see what happens next week — who knows anymore."

Although Sullivan predicts that gas prices will continue to increase, he doesn't see a need to rush out and spend an afternoon in a lower-price gas line.

"I've always been a fan of Chevron gas, it's worth paying a few cents extra," he said. "People who . . . are willing to wait to pay three, four cents less, I guess if you had a 40 gallon truck it might make a bit of a difference. But it doesn't really tempt me to go elsewhere."


E-mail: sisraelsen@desnews.com