Musings on Gasoline Purchase Habits

Why is it that when gas prices go up, the gas station seems to get more crowded?  This is particularly true at venues which typically sell gas 10-15 cents cheaper than competitors.  Even though the discount amount is about the same as always, and if you look at it as a percentage of the price per gallon the discount is actually smaller, these gas stations seem to get more crowded when the price goes up.
Let's take Costco for example.  Today's gas prices in the Bay Area are close to $4.00 per gallon.  Costco, by contrast, which typically sells gas for 10 cents per gallon less, sells gas today for $3.90.  When the price is lower (say, $2.00 and $1.90 respectively) the discount is .10/2.00, or 1/20, or 5%.  When the price is what it was today, the discount is .10/4.00, or 1/40, or 2.5%.  Since the consumer will save $2.00 when he fills up a 20 gallon tank regardless of initial price ($.10x20 = $2.00), then there is no economic reason why more people should purchase gas from Costco when the price is higher than any other time.  Of course, this all leads to the photo of the day:

I did some math while I waited the 5 minutes for my turn to pump gas.  There are 4 columns of gas pumps, with 4 pumps on each column, evenly distributed on each side of the column. This means there are 8 lines of cars waiting to fill up their tanks at any given time.  When I arrived at the station today, every line was at least 4 cars long, not including the vehicles already pumping gas.  That means that there were 4x8, or 32 vehicles waiting to pump, and 16 pumping at pretty much any given time. On the whole, that means there were about 50 vehicles at the station pretty constantly.  That, in my opinion, is rather crazy. When you compare this data to an average gas station, I suspect that we would find that Costco gets more customers purchasing gas per hour, than an average station does during the course of a day.

Now, just for fun, lets do some rough estimates.  If each Costco customer buys 15 gallons of gas (on average), and it takes 2 minutes for the vehicle to pull into place, pump the gas, and drive off, then Costco would have, on average, 16 pumps x 60 minutes per hour / 2 minutes per vehicle = 480 vehicles per hour.  480 vehicles x 15 gallons = 7200 gallons/hour sold throughout the day.  Presuming that the station is open for 12 hours, than the sum total of gas sold for 1 day would be 734,400 gallons. If then presume that Costco marks up gas on a nominal basis (lets say $.01), then Costco would earn $7,344/day from gasoline sales alone. Lets do the math now, to determine how much gasoline a normal station would need to sell to make the same profit. Since regular stations have a higher profit margin ($.11), they naturally need fewer customers to make the same profit. this would be $7,344/.11, or 66,763.6 gallons of gas that they need to sell during a day. Presuming that the average gas station is open 24 hours, instead of 12, then they would need to sell 66,763.6/24, or 2781.81 gallons per hour.  Again presuming an average purchase of 15 gallons per vehicle, then the average station would need 2781.81/15, or 185.45 vehicles per hour stopping at their station to fill up.  This, of course, is a little more than 3 vehicles per minute.  Now I don't think I have ever seen a gas station with that much business during a Wednesday at noon.

Anyway, the short version of all this, is that Costco must be raking in the money from gasoline sales, unless they are selling it with 0 profit margin.  The other lesson to take away from this, is that owning a gas station is not a very good way to earn lots of money quickly.

What are your thoughts?