The irony of crude prices breaking well above $85 can’t have been lost on the energy ministers who met in Cancun last week to discuss new measures for tackling oil price volatility. The big question is whether prices will remain at that level, and push even higher – something that could dampen nascent economic growth in much of the world.

As most reports have noted, the latest rise followed reports of improved global manufacturing data, particularly in China. Some analysts caution this is not sustainable, given that relatively substantial amounts of crude oil remain in storage, which should continue to dampen physical demand for oil.

But is there a fundamentals angle to this rise; and what would it mean if so? One long-time oil watcher says it could mean the high crude prices are not only sustainable, but will keep rising.

Opec producers fret about the destruction of demand for crude oil setting in if prices rise too high. Judging from the EIA’s latest short-term forecasts, their concerns about further declines in developed world demand might be borne out by this year’s US driving season.

The EIA says any boost from economic recovery for gasoline demand will be wiped out by higher prices, which the agency expects will be about 50c/gallon higher this summer than last year’s driving season – $2.92 compared to $2.44, to be exact, and prices will likely exceed $3 at times. The EIA, which has raised its 2010 WTI forecast slightly to $80.74, also says every dollar of sustained price increase above its forecasts will result in about a 2.4c per gallon increase for gasoline and diesel.