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Costco station will lower gas prices in Sudbury for a while, at least expert says

In response, other gas stations could reduce their 12-cent retail margin by as much as five or six cents.
costco membership car held up in front of gas station

A spokesperson for Costco Wholesale Canada has confirmed that its new Greater Sudbury gas station will be located next to its existing warehouse on The Kingsway.

The company's vice-president and general merchandising manager, Martin Groleau, said that although an exact date has yet to be confirmed, Costco is aiming for a summer 2022 grand opening.

"There will be 24 pumps at the gas station, and it will only sell regular and premium fuel. A Costco membership is required,'' said Groleau.

Costco Wholesale Canada said on its website that its approach to gasoline is the same as inside the warehouse: "high volume and low prices.''

Its gas stations feature one-way traffic, extra-long hoses, and no cashiers - cash and cheques are not accepted as payment. Those who wish to pay in cash must first purchase a Costco Shop Card inside the warehouse.

The company said eliminating the need for cashiers means shorter wait times for its members, and its exclusive agreement with MasterCard helps lower transactions fees, "which in turn helps Costco keep prices low.''

Experts predict the much-anticipated Costco gas station will drive down gas prices in Greater Sudbury - at least for a little while.

"All big box stores have an effect on what's called retail margins. Because Costco uses membership fees and honours only certain credit cards, the retailer can offer gasoline at cost,'' said Dan McTeague, president of Canadians for Affordable Energy.

He added that Costco has the ability to move larger volumes of gasoline.

"By doing so, I've seen as much as a four- to five-cent discount from suppliers,'' said McTeague.

"That means a big box store like Costco might offer fuel on a day like Tuesday, for example, for $1.28 a litre rather than the $1.40 we are currently seeing around Sudbury.''

In response, other gas stations could reduce their 12-cent retail margin by as much as five or six cents.

"That means savings for drivers - but it's not forever. A lot of gas stations will follow at the beginning but might ultimately decide it's not worth having zero margins,'' said McTeague.

"They don't have membership cards to back up their losses. You'd have to sell a lot of beef jerky to make up the difference.''

McTeague predicted Greater Sudbury drivers could see savings for "a good year or year and a half,'' and during that time, customers will have other factors to consider.

"The consumer will have to decide whether they want to pay Costco up front to use the service, and the next question would be availability on site,'' he said.

"When you have a choice between 50 gas stations, people are going to say, if I am going to save three cents a litre on a 60-litre, is it worth it to stay in line for half an hour to save $1.80?''

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