Anticipating higher future petrol prices, consumers actually push up petrol prices now

In his 1984 book The Evolution of Cooperation, Robert Axelrod suggested that people cooperate in repeated games because of 'the shadow of the future'. They alter their behaviour by cooperating now, because they anticipate that will lead to greater gains for them in the future. I really like this analogy of the shadow of the future affecting our decisions now, and not just in the context of game theory and repeated games. In fact, we've seen it play out in a different context this past week, as reported by the New Zealand Herald:

Kiwis are rushing to fill up their cars across the country amid fears of price increases at the pump because of escalating conflict in the Middle East.

Video sent to the Herald of Waitomo Tinakori petrol station in Wellington today showed a queue of cars waiting for fuel, with vehicles spilling out on to the road.

Waitomo Group CEO Simon Parham said there has been a similar increase in demand at stations across the country, with sales increasing by 10-15% this week.

“People are filling up and filling their cars ahead of the price increase that will flow through the market over the coming weeks because of the Iran conflict,” he said.

To see what is going on here, let's consider the retail market for petrol, as shown in the diagram below. Before the current conflict in the Middle East, the equilibrium price of petrol was P0, and Q0 petrol was traded per week. Then the conflict begins. Consumers anticipate that the price of petrol will increase in the future, so they decide to fill up their vehicles now. That increases the demand for petrol from D0 to D1. The equilibrium price of petrol increases to P1, and there is Q1 petrol traded in the week. 

Notice that by trying to avoid the high petrol price in the future, the consumers cause the price to rise today, which is exactly the outcome they were trying to avoid! In effect, when consumers rush to fill up early, they bring some of the future price pressure forward into the present. Expectations about future prices can cause self-fulfilling prophecies like this, which is a point I will make in my ECONS101 class in several weeks, when we talk about financial markets (where self-fulfilling prophecies are a clear and present danger at all times). The shadow of the future matters - consumers' actions based on trying to avoid future price rises make those price rises happen now instead.