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Lower than the rest

LIHUE — Although Alyssa Dato lives in Kapaa, she still makes the 25-mile roundtrip drive to buy gas at Costco.

It’s all about the prices.

“The best on the island, I would say,” Dato said.

By far, the best, when it comes to fueling up.

As of Friday, Costco’s unleaded gas was $2.59 a gallon, well under the $3.75 being charged by others on Kauai, including Shell and Chevron. It raises the question, for some, why Costco’s prices are so far under other fuel distributors.

Wailua resident Doug Foley has a theory.

“I don’t think they’re so low. I just think the rest of the other stations are just high,” said Foley, a longtime Costco member. “The pricing around the rest of the nation is more indicative of the Costcos here as opposed to the price of the local stations.” 

While gas prices on the Mainland have dropped to an average of around $2 a gallon for regular unleaded, they’re in the range of $3.30 across Hawaii — and most Kauai stations are 40 cents a gallon higher than that — except Costco, where longer gas lines are the norm almost any day of the week. 

So, what’s the deal? How can Costco be so far below other fuel stations on Kauai?

According to Petroleum Consultant Tim Hamilton, local gasoline dealers don’t negotiate prices with their suppliers. They are told what they are going to be charged and they mark their fuel prices to cover their costs of doing business. However, Costco is able to negotiate its prices with suppliers on the Mainland.

“Rather than have Costco become a supplier and bring its own gas to Hawaii, the suppliers agree to negotiate with Costco so it won’t do that,” Hamilton said.

Facts Global Energy Consultant Iman Nasseri said refineries across the state are bound to certain crude oils, whose prices are generally higher and “they need to price their products on slightly different economics than the U.S. Mainland.” 

“Costco, however, as a retailer, has always been able to manage selling at lower prices,” Nasseri said. “The main reason behind it is that Costco set the least profit margin for gas sales (perhaps close to zero), as gas sales is seen more as a marketing tool for Costco than the mainstream business as opposed to other retailers.”  

This means that because stations such as Chevron and Shell act purely as gasoline retailers and sell few other products, their prices are higher, Nasseri said.

As the spokeswoman for the Shell Corporation, Kimberly Windon explained the company’s gas prices. 

She said that, like other brand, Shell supplies wholesalers, who make their own decisions.

“The convenience store and the day-to-day site operations of each station are the legal responsibility of each wholesaler, station owner and/or operator, who make their own operating decisions, including setting fuel prices at the pump,” said Windon.

Shawn Parks, Costco’s vice president of the L.A regional Office, declined to comment on how the company determines its fuel prices.

Some Kauai residents plan to continue driving to Costco when it comes time to gas up their cars, SUVs and trucks. Based on buying 15 gallons a week, a driver could save nearly $80 a month at Costco.

Costco member and Kapaa resident Cathleen Hernadez-Martinez said the company could have lower prices because it deals in such high volume.

“It gives us another option and at lower prices,” she said.

Valentine shared a similar opinion.

“There’s a whole lot more volume running through the Costco gas than any other place on the island,” she said.

No matter the reason, Lihue resident Carol Valentine knows where she’s headed when the fuel gauge nears empty: Costco.

“It’s way cheaper than any other gas price on the island so we always go here,” she said.

Averie Soto, staff writer, can be reached at 245-0452 or asoto@thegardenisland.com.

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