If the price of home heating oil is widely expected to fall in the coming months, consumers who heat with oil will put off filling their tanks as long as possible to take advantage of the expected lower prices.
On the graph to the right, D1 is the demand curve for heating oil when prices are expected to remain relatively constant. If prices are expected to drop a great deal in the future, current demand will shift back to D2. Be careful. Demand curve D2 is NOT the demand curve that will hold later when prices actually have fallen, it is the demand curve now that prices are expected to fall in the future.
The expectation of falling prices means that consumers buy less at every actual price now as they anticipate lower prices in the near future.
