They purchase their gas on a dialy basis, from distributers who sell at what is called a rack price, which is based on the spot price of that day's open outcry market settlement.

Costco uses gas, which they generally price at about 6 to 12 cents a gallon below the local competition, as a loss leader to generate in-store sales. So they will make a minimal profit, sometimes even take a small loss, because statistics show that a high percentage of consumers who go there to purchase gas will shop in the warehouse itself which increases Costcos sales and profits. Keep in mind that the pumps that they have on their lots are all self-serve, so basically their are no labor costs. They don't have to make money. If they lose money, they make it up in store traffic.