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Costco Gasoline & Neighboring Stations

One of the reasons I joined Costco was because the price of gasoline at a Costco was about a ten cents (or greater) cheaper than the surrounding gas stations when I lived in College Park (the neighboring gas stations were two Exxon’s, a BP/Mobile, and a Gulf). At the time, even with a 5% rebate on gasoline credit card (AT&T Universal Cash Rewards, though here’s the latest list of the best gas credit cards [3]), the difference in price was greater than 5% plus I had the benefit of buying in bulk at Costco for things like 7 lb. tub of nacho cheese [4]. The downside of using Costco was that they only accepted American Express (1% cash back) or debit cards (0% cash back), so I couldn’t double dip and use a higher cash-back card with the cheaper gas, until I ran into a concrete and useful real life example of price competition.

When I moved up to Howard County, the Costco Warehouse still had gas but it also had two Exxon’s right next to it (you can debate the usefulness of two Exxon’s within a mile of each other, but whatever). Due to the proximity, the Exxon’s gas prices were depressed compared to gas stations not in the region. If you strayed more than a mile, you could see “regular” gas prices not affected by the lower Costco price.

Here is where the price competition comes into play: The Exxon gas prices are essentially pegged to be three or four cents higher than Costco’s gas price (based on my experience only, no actual concrete evidence). So I can get Exxon gasoline at a price cheaper than Costco after you factor in the 5% cash-back and current gasoline prices (at $2.00, if you can find it that cheap, you get 10 cents back).

Price competition in a capitalist society in action! I better find a pretty good reason to keep Costco around now… I mean, other than the 7 lb. tubs of nacho cheese. 🙂