You thought yesterday's oil spike was bad? Prepare for misery. Analysts at Nomura Holdings warned this morning that crude could jump to $220 a barrel if Libya and Algeria halt exports.


But before dusting off your copy of Mad Max, stop and breathe. With all respect to the good folks at Nomura, the odds of oil actually hitting $220 are slim, regardless of Middle East tension.

I'd put the odds of oil hitting $220 a barrel at close to zero. I'm confident in that. Why? Because the world can't afford $220 oil. We can't afford much with 9% unemployment. And if we can't afford something, we use less of it. And when we use less of it, there's a good chance that prices will fall.

If this rings a bell, it should. As oil surged past $140 a barrel in 2008, predictions for $250 and beyond came charging in. Oil was finite, they said, and thus the sky was the limit for prices. Wrong. As gas surged above $4 a gallon and airfare costs rose beyond reach, people retreated. They drove less. They took fewer vacations. The kept the RV in the garage. They turned the thermostat down. Smart companies like Toyota (NYSE: TM) and Tesla (Nasdaq: TSLA) built more efficient vehicles. The economy hunkered down and avoided high-priced oil at all costs. 

The result, alas, was the tipping point that pushed the economy into the Great Recession. But it also broke the back of rising oil prices, and then some. Peaking at more than $140 a barrel in summer 2008, oil was priced in the $30-a-barrel range not a handful of months later. It absolutely collapsed. People simply couldn't afford its wrath anymore. Markets are good at finding a happy equilibrium.

An example I like when thinking about this stuff is the work of eighteenth century British demographer Thomas Malthus, who wrote an essay called An Essay on the Principal of Population. It's still heavily read to this day. His theory: The world was destined to a hell of permanent famine and starvation, because population was growing faster than food supply. The idea seemed bulletproof. Yet he was dead wrong. Why? Because the pain caused by rising food prices pushed people to figure out new, more efficient, ways to grow it. High prices change behavior.

So while calls for $220 oil might be music the ears of BP (NYSE: BP) and ExxonMobil (NYSE: XOM) shareholders (and I'm one of them), don't hold your breath. Problems correct. Markets work.

Fool contributor Morgan Housel owns shares of Exxon. The Fool owns shares of ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.