Iwilei to get Costco gas
By Andrew Gomes
Advertiser Staff Writer
O'ahu commuters frustrated with gas prices that seem to rise by the day can expect a pre-holiday gift in mid-November when Costco Wholesale plans to open a value-price gas station next to its store in Iwilei.
The 16-stall station, which encountered nearly a year of permitting and design delays, is scheduled to break ground within the next two weeks on Alakawa Street across from the shared entrance to Costco and Home Depot. It will be the first discount gas retailer in urban Honolulu.
Designed with three 30,000-gallon underground tanks, the station expects to sell almost 50,000 gallons of gas a day to Costco members and become one of the busiest stations for the Issaquah, Wash.-based retailer.
"We are expecting to be super busy ... certainly with the way gas prices are," said Robert Loomis, warehouse manager at the Iwilei Costco.
Prices have yet to be determined, and will depend on the wholesale cost of gas in Hawai'i shortly before the station opens, but historically, the two other Costco gas stations in the state have sold gas for up to 30 cents less than other dealers.
"I will definitely drive there," said Robin Boolukos, a Castle & Cooke employee who lives in town but filled up her Toyota last week at the Costco in Waipi'o, paying $2.02 a gallon for premium gas, compared with the $2.27 statewide average for premium.
Regular gas at Costco in Waipi'o last week sold for $1.89 a gallon, 22 cents less than the $2.11 average calculated by AAA.
A few Waipi'o-area gas stations have managed to match Costco prices, and the difference in the area has been closer to 5 cents per gallon or less recently.
Similar price pressure is expected to spread through one of the state's densest areas of residents, businesses, commuters and gas stations, creating a challenge for nearby dealers, and relief for consumers who believe a shortage of competition keeps Hawai'i gas prices artificially high.
Many dealers said it's impossible to compete with Costco prices, because of the company's ability to get a slightly better wholesale price and sell vastly more gas.
"Costco is selling gas under the dealer's invoice price," said Frank Young, president of the Hawaii Automotive Repair and Gasoline Dealers Association. The former Chevron dealer, who does not sell gas at his K&Y Auto Service in Kaka'ako, said the pressure will reach into Kalihi and beyond, and could cut sales by nearby dealers as much as 30 percent.
Some dealers fear going out of business as razor-thin margins are cut even thinner.
Paul Latham, gas vice president for Costco, said the company's business model is based on high-volume, low-margin sales at stations designed to speed traffic flow with low overhead, wide one-way lanes, extra-long hoses and no cash sales. "I think the value of Costco there is it keeps all the other players honest," he said. "I think it's unlikely those guys would be down there on price if we weren't there."
Costco, which buys gas from Aloha Petroleum, opened its gas station in Waipi'o three years ago, followed by one in Kona on the Big Island a year later. Business at both stations is estimated to be five to 10 times higher than a typical dealer.
The company had expected to open the Iwilei station early this year, but because of the area's high water table and city concerns about traffic congestion, the company had to dramatically alter the station's design, Latham said.
Two more Costco gas stations are planned as part of store renovations. A Hawai'i Kai store expansion and gas station are early in the planning process, and a Maui store renovation and gas station are scheduled next summer.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
