Costco Fuels Gas War Warehouse Chain’s Entry Into Local Gasoline Market Drives Prices Down
Fueled by new competition, retail gas prices in the Spokane area this summer are down and dropping.
The opening of 12 pumps at the North Spokane Costco two weeks ago may have sparked a price war that has spread through Spokane and toward the Idaho border.
The Inland Automobile Association’s weekly survey of eight service stations around Spokane shows prices dropping in July. The average for unleaded regular gas this week is $1.20.2, some 2.2 cents lower than last week. Since June 25, prices have dropped 7.2 cents.
“Historically the trend is for prices to be up when demand is the greatest,” said Ed Sharman, spokesman for IAA. “Between Memorial Day and Labor Day, the prices are usually the highest of the year.”
Costco, the Issaquah-based warehouse discount store, started selling gasoline this spring and now has pumps at eight stores in California, New Mexico, Arizona and Nevada. Its pumps in North Spokane, which opened July 18, are Costco’s first in Washington. The company has plans for several stations in the Puget Sound area.
Though Costco’s gas is only for its members and the warehouse store doesn’t advertise, people are seeking out the pumps.
On Wednesday morning, Mike Roach pulled up to the warehouse store’s station in a pickup with a camper, towing a boat. Costco was the first stop on Roach’s family vacation.
“That was part of the plan,” he said. “On the way out of town I wanted to loop up here to get the best price on gas.”
“I think people are real sensitive to gas prices,” Roach said as he fueled the two tanks on his truck and one on his boat. “The savings I’m getting here is significant.”
The North Spokane Costco sells an average of 10,000 gallons a day. “Business is steady,” said Eric Busch, manager at Costco. “We have our rushes right after work and right before work like everybody else.”
On Wednesday morning, Costco’s unleaded regular gasoline was priced at $1.12.9 per gallon. The BP station across the street had reduced its price to match Costco.
A few miles south on Division, a Chevron station showed prices at $1.19.9. The station’s owners had also recently adjusted their prices to compete with prices at the other area service stations.
“They’re all going down because of Costco,” said Jason Gibreth who works at the Chevron. He said Costco isn’t a threat to business because the fuel is only for its members. “We’re not even worried about Costco,.” he said. “We’re just watching what everybody else is doing.”
In the Spokane Valley, Exxon manager Julie Jackson has also noted lower prices. She checks other stations daily and adjusts her prices primarily to compete with the Texaco station across the street. “We just go back and forth,” she said. “We try to keep competitive.”
While retail prices are dropping, the wholesale cost of gas is on the rise, said Jim Redmon, general manager of Divine’s Inc., a gasoline distributor. “I guess in my round-about way, I would assume that everyone’s just concerned about Costco,” he said.
While motorists in Spokane have benefited from the lower prices, some stations in the Tri-Cities have driven prices even lower. Arco and Conoco stations in Pasco, vying for market share, have been selling unleaded regular at 88.9 cents per gallon.
Since wholesale gasoline prices have risen lately, Redmon expects the decline in service station prices will soon end. “From all indications, I think we are going to see some upward movement,” he said. “Something’s got to give.”
When the downward trend will end is anybody’s guess, said IAA’s Sharman: “I refer to gasoline prices as one of life’s great mysteries.”
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