In This Article:
GasBuddy Head of Petroleum Analysis Patrick De Haan joins Yahoo Finance Live to discuss oil and gas prices, why consumers flocked to Costco and other wholesale clubs for gas, and how a mild recession would impact gas purchasers.
Video Transcript
JULIE HYMAN: Gasbuddy head of petroleum analysis Patrick De Haan is with us. Patrick, I follow your Twitter feed very closely to find out what's going on with those gasoline prices. How much has the past year affected the flow of where people were buying gasoline?
PATRICK DE HAAN: Well, as we saw gas prices explode this year, motorists were penny pinching everywhere they could. And as you mentioned, Costco and wholesale clubs have generally been very aggressive on pricing on gasoline. And so when the national average exploded to $5 a gallon, consumers flocked to save any couple pennies they could. And with frequency, that took them to wholesale clubs like Costco, very price aggressive and having the lowest price.
And as you cite, motorists, when they're at the location, often will go inside. So it's a huge boon to Costco. When prices go up, Americans become much more price sensitive, and wholesale clubs like Costco are very much the leaders in having and bringing down prices the most. And that's where a lot of this traffic went. It wasn't necessarily a shift in gallons-- away from gallons. It wasn't necessarily a drop in consumption, but many Americans routed their purchases to the more aggressive retailers, like the wholesale clubs.
INES FERRE: And Patrick, how are they able to be so aggressive? Because I'm seeing some figures that they can sell fuel around $0.20 to $0.30 less per gallon than regular gas stations. But is this volume driven?
PATRICK DE HAAN: Well, it is somewhat the power of economics. Certainly, refiners would love to sell to a massive chain like Costco, where volume is off the charts. It's a great way to get those barrels and those gallons to the market. At the same time, Costco has a different strategy. Because it has attached clubs where margins are improved, they have a different strategy of getting people to the location with a very low price.
Then, as you mentioned, many of those that are filling their tanks will go into Costco, where margins are improved. So when gas prices are very high, you get more people going to Costco to fill their tanks. That also means more volume, more foot traffic into the wholesale clubs that are attached.
BRAD SMITH: If we do see a mild recession, as some bank executives or even economists are calling for right now, do you believe that there will be any significant shift in how consumers are purchasing their gas, where they're purchasing their gas, and what that means for the sellers of that gas, like a Costco, too?