Rising Gas Prices: How Costco’s Strategy Benefits Small Businesses

UpTrajectory Review

Gas prices are climbing again, and Daniel Kline at TheStreet connects that pain to an unlikely beneficiary: Costco. The national average for regular gasoline hit $4.55 per gallon on May 7, up 25 cents in a single week and $1.40 higher than a year ago, according to AAA. That approaches the 2022 peak of $5.01. Kline, who drives an electric vehicle with a small emergency gas tank, paid nearly $10 to fill his own two-gallon reserve and $45 to fill his son's Prius. The Energy Information Administration reports gasoline demand dropped from 9.10 million to 8.81 million barrels per day last week, while domestic supply also tightened. Drivers are cutting back, but those who continue to fill up are hunting for cheaper stations.

For small-business operators, this matters in two ways. First, if you run delivery routes, service calls, or any fleet activity, your fuel line item is growing weekly. A driver covering 500 miles per week in a vehicle that gets 25 miles per gallon now burns about $91 in fuel at the national average, up from $63 a year ago. That gap erodes margins fast, especially for contractors, caterers, and retailers who absorb fuel costs rather than pass them to customers. Second, if your business sits near a Costco or competes with one, the warehouse club's gas strategy is pulling traffic. Costco prices fuel below market to drive membership renewals and in-store purchases. When gas prices spike, that discount widens in absolute dollars and draws drivers from farther away.

The genuinely useful insight in Kline's piece is the historical pattern: higher fuel costs benefit warehouse clubs because consumers become willing to drive farther for cheaper gas. That behavior shift is real and measurable. What the article underplays is the small-business angle in the headline. Costco's gas strategy does not directly benefit most small businesses unless they hold a membership and route drivers past a warehouse. The indirect benefit is subtler. When Costco undercuts local stations, independent gas stations and convenience stores lose fuel traffic. Some of those operators also sell food, coffee, and sundries. If their forecourt traffic drops, their in-store sales drop too. The competitive pressure is uneven.

The regional spread in Kline's data deserves attention. California drivers pay $6.16 per gallon while Oklahoma drivers pay $3.98. That gap changes the calculus. In high-price states, the Costco discount is larger in dollar terms and the incentive to drive out of the way is stronger. In low-price states, the savings may not justify the detour. For a business operator, the practical question is whether rerouting a driver past a warehouse club saves enough to offset the extra miles and time. At a $1.50 per gallon spread, a 15-gallon fill saves $22.50. If the detour adds 20 minutes and four miles, the math may still work. If it adds 40 minutes in traffic, it likely does not.

Kline's piece cuts off mid-sentence, so the full article likely expands on the 2022 AAA survey he references and Costco's specific pricing strategy. The truncated text still provides enough to act on. Watch whether gas prices breach the $5.00 threshold nationally, because that level historically triggers sharper changes in consumer driving behavior and accelerates the shift toward warehouse clubs and discount fuel chains. Also watch whether your local Costco adds fuel pumps or extends hours, which signals aggressive traffic capture. If you operate a business that depends on drive-by traffic near a Costco, consider whether your value proposition survives when customers bypass your block to save $20 on a tank.

The actionable move is straightforward. Audit your fuel spend this week. Calculate your actual cost per mile, including detours for cheap gas. If a warehouse club membership saves your drivers more than the annual fee in fuel discounts, join. If you compete with Costco for convenience traffic, double down on speed and service, because you will not win a price war on gasoline. The operators who treat fuel as a managed line item, not a fixed cost, will keep their margins intact through this spike.

“Higher fuel costs historically benefit warehouse clubs like Costco because consumers become more willing to drive farther for cheaper gas.” — TheStreet

Takeaway: Audit your actual fuel cost per mile this week; a warehouse club membership only pays off if the per-gallon savings exceed the detour time and annual fee.