Here's how we're coping with high gas prices, according to Costco and Walmart

U.S. gas prices averaged $4.39 per gallon on Thursday, up $1.22 year over year, as Iran-related supply disruptions pushed fuel costs higher. Costco said gas sales hit record levels from April to mid-May, while Walmart and Murphy USA reported more value-seeking behavior and smaller fill-ups, with Walmart seeing fewer-than-10-gallon purchases for the first time since 2022. Executives warned the higher fuel bill will eventually feed through to store shelves via higher transportation, resin, and fertilizer costs.

Analysis

The near-term winners are not the fuel sellers themselves so much as the operators with the best price-per-mile value proposition and the widest customer flywheel. COST should get disproportionate traffic capture because high fuel prices make the membership economics feel more compelling, which can lift ancillary basket spend and improve renewal stickiness even if fuel margins stay thin. MUSA is the cleaner pure-play beneficiary on volume, but the bigger second-order effect is that regional independents and convenience chains without a structural price edge will see traffic leak toward clubs and the lowest-cost forecourts.

WMT is the more interesting read-through on the downside: the fuel stress signal points to lower-income trade-down behavior that usually shows up first in discretionary mix, then in units, then in private-label substitution. That creates an asymmetric setup where reported top-line may hold up for a quarter or two, but mix and margin can deteriorate quickly if households keep reallocating cash to gasoline. The market may be underestimating the lagged pass-through from freight and packaging into retail gross margin, which tends to show up over 1-2 quarters rather than immediately.

The key catalyst is not just spot oil, but whether shipping constraints persist long enough to force inventory rationing and broader inflation psychology. If gasoline spikes another 10-15% from here, you should expect a faster hit to consumer sentiment, lower miles-driven, and more obvious trading-down at the margin; if tensions ease, the reversal could be abrupt because these demand shifts are behavioral rather than structural. The contrarian angle is that the current move may be over-discounting permanent inflation: if supply normalizes, fuel demand at club/discount channels likely mean-reverts faster than consensus expects, while the consumer-stress signal in WMT could fade within a single quarter.

Key Decisions for Investors

• Go long COST vs. short WMT into the next 4-8 weeks: the trade captures relative traffic benefit from fuel-driven value-seeking while hedging broad consumer weakness; target 5-8% relative outperformance if gasoline remains elevated.
• Add MUSA on weakness for a 1-3 month tactical long: volume should stay supported by first-time and lapsed customer reactivation, but size modestly because the stock is exposed if fuel spreads compress or prices reverse quickly.
• Buy WMT downside protection via 1-2 quarter puts or put spreads: the market may be underpricing margin pressure from lower-income stress and freight/input inflation; use defined-risk structures because top-line resilience can mask the earnings inflection.
• Consider a basket short of higher-cost regional c-stores / convenience names versus COST/MUSA if liquidity allows: the second-order loss is traffic share, not just fuel margin, and that tends to compound over several reporting cycles.