The Economics of Expectations: How Individual Consumer Decisions Create Fuel Shortages

Shortages as a Consequence of Consumer Behavior

During the COVID-19 pandemic, many remember how sugar, buckwheat, and other essential goods disappeared from store shelves. It later became clear that their production had barely declined, and the shortage was a result not so much of actual scarcity as of the mass desire of people to stockpile these goods.

Similar processes are currently being observed in the motor fuel market. Many media outlets explain them by refinery maintenance, logistical constraints, and reduced supply. However, a logical question arises: can fuel shortages be influenced by changes in consumer behavior itself?

How Expectations Change Driver Behavior

Let's try looking at the situation from a different angle. Imagine a typical driver. Over years of operating a vehicle, every driver develops a stable habit of when exactly to refuel, and this decision is made automatically and almost never changes. Now suppose the information environment begins to shift and news reports start appearing about possible disruptions in gasoline supplies, photos of lines at gas stations spread through social media, and acquaintances mention they've already filled up their tanks "just in case."

Will the typical driver's behavior change? Most likely, they won't drive more, meaning their actual fuel consumption will remain the same. However, they may change the timing of refueling. Let's say if previously they calmly drove until the tank reached 20% remaining, now they'll prefer to refill when it's still at 40–50%. Such a decision seems perfectly rational, as it reduces potential risks. This is where an economic paradox emerges. Indeed, each individual driver is acting sensibly or, as economists say, rationally, but when thousands of people make such decisions simultaneously, a collective effect arises that can overload any city's gas station network.

An Economic-Mathematical Model of the Expectations Economy

To explain this mechanism, we propose a simple economic-mathematical model that describes this dynamic. Let I be the index of change in consumer behavior under the influence of expectations, where (I=0) means driver behavior has not changed, and (I=1) corresponds to maximum behavioral change.

By "expectations economy" in this article, we mean a situation in which market participants' expectations begin to exert an independent influence on demand regardless of changes in actual consumption of the good.

Assume that rising expectations among market participants (drivers, consumers) leads to an increase in the target reserve fuel supply according to the formula.

where

S₀ – the usual reserve fuel supply;

S* – the reserve fuel supply that drivers consider necessary when expectations change;

I∈[0;1] – an index of changes in consumer behavior driven by expectations.

Consequently, an increase in the I index simultaneously leads to growth in both the desired reserve fuel supply and the number of drivers visiting gas stations.

Since an increase in reserve supply causes some drivers to refuel earlier, the actual flow of vehicles to gas stations also rises.

Therefore, vehicle flow also increases proportionally to the expectations economy index:

where,

N_f – actual vehicle flow;

N₀ – average vehicle flow under normal conditions.

The utilization coefficient of the gas station network is determined by the expression

where

C – daily throughput capacity of the gas station network.

When ρ<1, the gas station system functions stably.

When ρ≥1, queues begin to form.

Thus, the model demonstrates that local shortages can arise not only from increased actual fuel consumption, but also from synchronized changes in driver behavior, when motorists begin refueling earlier than usual.

Model Performance Illustration

To illustrate how our model works, let's assume: N₀= 10,000 vehicles per day, C= 15,000 vehicles per day.

This gives us:

 Of course, these calculations are illustrative and don't claim to describe the situation in any specific region. Their purpose is far more modest—to demonstrate the mechanism by which market equilibrium breaks down.

The model's main conclusion turns out to be surprising, as it convincingly shows that the system doesn't need a majority of drivers to change their behavior to become unstable. A relatively small portion of drivers simultaneously deciding to fill up earlier than usual and increase their fuel reserves is enough to disrupt equilibrium.

Information as a Factor in Market Instability

This is precisely where one of the distinctive features of the modern economy reveals itself—information becomes an independent economic resource. Information travels at the speed of light, while logistics moves at the speed of transportation. An oil refinery cannot instantly increase fuel output, and delivering additional fuel volumes takes time. It's precisely this difference in speeds that becomes the source of temporary market instability.

This creates a positive feedback loop. Information changes consumer behavior, increased traffic flow creates lines, and the lines themselves become a new information signal, prompting other drivers to also fill up earlier than usual. This process continues until the market restores equilibrium.

The Role of Objective Factors and Consumer Behavior

The proposed model doesn't deny the influence of objective factors—refinery maintenance, logistical constraints, or reduced fuel supply. It simply demonstrates that changes in consumer behavior can amplify their impact many times over. That's why supply disruptions of similar scale can lead to completely different outcomes depending on market participants' expectations.

Practical Conclusions and the Main Paradox of the Expectations Economy

The practical takeaway is that market stability is determined not only by supply volume, but also by consumer confidence. A consistent and credible information policy, predictable decision-making, and the absence of contradictory signals can reduce panic buying and people's drive to create excessive fuel reserves, thereby easing the burden on infrastructure.

Perhaps this is precisely why in the modern economy, market stability is determined not only by the volume of goods produced, but also by how stable consumers' own expectations turn out to be.

And herein lies, perhaps, the main paradox of the expectations economy. Collective shortages often begin not with empty oil depot tanks, but with synchronized changes in the behavior of millions of consumers. This, in our view, is where the main paradox of the expectations economy manifests itself.