Gas station owners worried about their profit margins with the pending arrival of a Costco gas bar have only themselves to blame, a petroleum analyst says.
Pump prices in Kelowna have consistently been higher than in other communities because of a lack of competition among gas retailers, says Dan McTeague.
“I warned gas bars that charging inexplicably high retail margins would invite Costco to come to Kelowna with a gas bar and discipline those bloated retail margins. That day has come,” said McTeague, a longtime analyst for GasBuddy.com who now brands himself on Twitter as the Gas Price Wizard.
“It’s big news that Costco wants to open a gas bar in Kelowna,” he said. “It will definitely keep gas prices in check.”
Should Costco eventually win the necessary city approvals to open a larger store, with an adjacent gas bar, McTeague predicts the price drop at local pumps will be immediate and significant.
“I would expect the price to drop at least five cents a litre and maybe as much as 10 cents,” McTeague said.
Currently, regular gas is selling for 131.9 at Kelowna area gas stations. Gas sells for 119.9 at the Costco store in Kamloops, where other gas retailers are charging 124.9.
Kelowna area gas stations currently reap a per-litre profit of about 17 cents a litre, McTeague said.
“Twelve is considered high,” he said.
McTeague said Costco is able to sell gas for less, in part, simply because of its willingness to accept lower profit margins. It also benefits from advantageous deals with suppliers.
“They get fairly decent prices from their suppliers because they can sell a lot of gas,” McTeague. “So that probably saves them two or three cents a litre right there.”
On its website, the company says: “Costco’s approach to gasoline is the same as inside the warehouse: high volume and low prices.”
To buy gas at a Costco, you must have a Costco membership card, which costs $60 annually. Payment is only by MasterCard or a debit card.