Costco Gases In The United States: A Case Study

We've all experienced this before, and for future drivers it is bound to happen. Before driving home after a long day at work, you head to the nearest gas station to find the prices at a hefty $3.59 per gallon. You shrug since the cost last week was a few cents higher, and proceed to fill up your car. With your gasoline capacity at its limit, you drive around the corner only to have your jaw drop when you realize that this gas station's price is thirty cents cheaper than what you just paid for. Then, talking to the empty seat beside you, you ask, “Why do gas stations in the same area charge different amounts per gallon?”

The chart above shows a graphic comparison regarding the different gas prices at the two different Marathon locations. This graph shows a visual trend of each of the various gasoline prices. According to the data recorded, the gasoline prices at the Angola Marathon throughout the week were, on average, about fourteen cents more per gallon than at the Muncie Marathon. The prices of gasoline at the Muncie Marathon declined, on average, about four cents per gallon per day throughout the week. While the gas prices at the Muncie Marathon continuously decreased each day, the gas prices at the Angola Marathon varied each day. Within the first three days, the gas prices at the Angola Marathon decreased about two and a half cents each day, on average. On the last day data was recorded, the trend at the Angola Marathon was reversed, and the price of gas increased by one cent.

Diesel fuel prices also vary wildly depending on the season, region, and even individual fuel retailer, sometimes going for less than regular gasoline and sometimes going for more than premium.

Summery: Now you know that the rise in gas prices is because of three main factors, the price rising of crude oil, continues increase in internal regulations in the United States and the huge increased demand for the product in and out side the United States.

California is the third largest in fuel consumption on earth, behind the U.S. and all of China, and with this demand needing to be met and a diminishing supply of fossil fuels, comes the rise of a new revolution, natural gas. With the start of the industrial revolution came the beginning of the use of fossil fuels. Thus, making the United States overly dependent on a limited resource that was also harming our environment. Over the past few decade, nations around the world have realized that the finite amount of fossil fuels is coming to an end, and our need for alternative fuel and energy sources is growing. We have experimented with different types of resources, one of them being natural gas. Natural gas has been a

California since the gold rush has been known as the “Golden State” where it’s flooded with multicultural richness from the beaches to the mountains. California today is the most densely populated state with 38.8 million residents and is still rising, however, not only is the population ever increasing so are gas prices. Allysia Finley an editorial writer from The Wall Street Journal states, “The national average is $2.76 a gallon, while the Golden State drivers pay $3.88. Eco-virtue is expensive” (Finley 1). Gas prices in California has left an effect of overpriced due to many contributing factors: regulation over the environment, overconsumption, and how rational people think at the margin.

As the prices of fuel increase nationwide, it isn’t only the local residents that feel the pinch of higher fuel prices. Those responsible for fueling ambulances, fire engines, and police cars are also battling the soaring transportation costs.

Frist of all, drive throughs can lead to a waste of a lot of gas. According to Trapped in the Drive-Through and Wasting Gas, "In 2007, a California state science fair student estimated that vehicles idling at California’s 8,500 drive-through businesses consumed 32 million gallons of gas." This shows instead of wasting your gas on meaningful cause we chose to waste it on drive throughs. Also, it states "Just 10 minutes of idling at the drive-thru window per day adds up to an average of 22 gallons of gasoline a year — at current pump prices. That’s $80 a year on wasted gas." This shows that instead of wasting gas by driving ten minutes on the interstate people decide to sit in drive throughs and basically throw money out the

In two out of the fifty states it is illegal to pump your own gas, Oregon and New Jersey. Every year, my family and I go to Texas for three weeks. While we are there, we drive a lot! This means a lot of trips and also means a lot of practice pumping my own gas. Since I don’t have to do it on a regular basis, I don’t really mind it. But listening to other people talk about this I heard something else.

What is Costco’s business model? Is the company’s business model appealing? Why or why not?

As a Costco Wholesale consultant we are looking to expand our company in a foreign market. Costco wholesale first opened in 1976 under the name of Price Club who was originally serving to small businesses. Our company provides a wide rang of merchandise ( food, electronics, clothing, etc.) and the convenience to have a exclusive member service. Later on the company decided that they could achieve greater sells by serving to a selected audience of non-business members therefore the first Costco warehouse was opened in 1983 in Seattle. Our operation is simple we like to keep costs down and let our members save. Since our company has been expanding globally we have been looking for the next country that we would like to open our company in. The

Costco: the big box wholesale retail store. Costco has been around for almost 50 years, offering bulk products at wholesale prices. As most families have adaptive to being small, large or blended, there is always something that wholesale stores have that is worth buying in bulk. You have the option of buying detergent, paper products or even food in bulk. Now a day, some of the “big box” stores even offer hot foods, clothing and furniture.

The fact that Costco has one of the most efficient market supply chains in the world whereby it facilitates the movement of merchandise from the manufacturer to store shelves with the least amount of physical effort and labor is another reason that makes Costco so successful. As of 2016 Costco inventory turnover ratio sits at 12.94. Inventory turnover ratio for 2016: Sales / inventory; Costco Net sales for 2016 was $116,073,000 and inventory for 2016 was $8,969,000 which comes out $116,073,000 / $8,969,000 = 12.94. Which means that Costco is able to turn over its entire inventory roughly about 13 times a year. This process of eliminating the need for breaking down pallets and repacking it for different stores is where Costco excels at and that’s good news for Costco bottom line. Wulfraat (2014).

The change in prices affect the producers because now the producer has to lower the price because they are losing business because people are going to other gas stations because it is cheaper.

“Costco is a wholesale warehouse that sells its merchandise in bulk at low prices to membership paying customers” (Lewis, 2017). “Costco was started by Jeffrey H. Brotman and James D. Sinegal in 1983” (Lewis, 2017). The first Costco went up in Seattle with the name of Price/Costco, but was later changed to Costco Companies Inc., and after a few years the name changed once again to its now current name of Costco Wholesale Corporation. Costco’s merchandise consists of many different name brand products, but they also carry their very own Kirkland brand items. With the Kirkland brand, Costco has made it so they can develop new products and have complete control over quality and price, to help compete with other leading brands. Costco’s target customers tend to be wealthier households with an income of around $100,000, due to the membership fee and on average spending of around $925 per visit (Bowman, 2016). With the revenue Costco brings in monthly they have become the number two retailer store in the world with stores in over nine countries, with $116.2 billion in revenue (Dhiraj, 2017).