Costco gas stations

Hometown gas stations struggle to compete against Costco; MN Dep
April 21, 2017 – 09:55 am


The up and down price war is part of the game you play when you enter the gas business, but some are saying Costco is playing it unfairly by selling gas for below wholesale value. Costco is defending the legality of its gas pump practices, but it doesn't change the fact that it has independent gas station owners fighting to stay afloat, and now, the Minnesota Department of Commerce is getting involved.

"Right now we're selling gas for more money, but we're making less money on it, ” said Tom Gauthier of Oronoco Gas n' Go. He's owned the business for three years and knows it's competitive, but it's been so tight this month that he's barely making ends meet.

"Are you on pace to break even for the month of August or profit for the month of August?" asked NewsCenter's Devin Bartolotta.

"No, we're not on pace to break even for the month of August, ” Gauthier replied.

It's the jump at the pump that Virgil's in Rochester is feeling, too.

“This is the worst I've seen it, and we've been on this corner for 63 years, ” said Bruce Nelson, the president of the company. Both stations are blaming Costco, which offers gas much cheaper than smaller stations can compete against.

So low, both Virgil's and Gas n' Go owners believe they're barely breaking even because Costco is breaking the law.

"They are selling fuel illegally, and so for an independent businessman trying to compete in that market, we just can't do it, ” said Nelson.

Monday morning, gas at Costco was 11 cents cheaper than Gas n' Go, Casey's, and Holiday, and 3 cents cheaper than Kwik Trip next door.

Store Manager Jay Yang says Costco isn't “here to ruin anyone, " and everything they're doing is legal. He defended their pump practices, saying they're trying to provide the lowest possible price for their customers.

The Minnesota state law meant to prevent this from happening is complicated. The “Unlawful Gasoline Sales Law, ” enacted in 2001, requires that all gas stations sell their gas for eight cents higher than the wholesale price. But the definition of “cost” alone is three paragraphs long, and is convoluted. You can read the law here.

Staff at the Minnesota Department of Commerce Monday afternoon told KTTC they have received numerous complaints about the gas prices in the Rochester area.

They would not name Costco specifically while talking to us, but said a state investigation is underway into whether a certain station in Rochester has actually been obeying the law.

The result of a law with possible loopholes is hurting small stations, which can't afford for gas to be a loss leader.

"In these prices that are just going up and down and up and down, the little guy is really caught, ” said Gauthier, who added that he isn't in danger of closing because of this problem.

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Popular Q&A
How much do costco gas stations make? | Yahoo Answers

It varies from day to day, but the gross profit margin is generally in the 15-30 cent range and of course is subject to all the normal business expenses.

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