You think $78 a barrel for Brent crude oil and $3 a gallon for petrol is high? Wait until the winter and today’s prices will seem like a bargain, warns Goldman Sachs.

Oil prices have risen within a whisker of their all-time highs. On Monday Brent crude oil hit an intra-day high of $78.40 a barrel, just 25 cents below last August’s all-time high of $78.65 a barrel (here the FT’s story). Investors cashed in their profits on Tuesday sending Brent crude oil down to $76.00 a barrel.

Looking ahead, the US investment bank said on Monday in a report that oil prices could hit $90 a barrel by the autumn and $95 in winter unless the Organisation of the Petroleum Exporting Countries increases its output.

Jeffrey Currie, of Goldman Sachs in London, said: "An increase in Saudi Arabian, Kuwaiti and United Arab Emirates production by the end of the summer is critical to avoid prices spiking above $90 a barrel this autumn."

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The International Energy Agency, the industrialised countries’ energy watchdog, on Friday said oil demand in 2008 will grow by 2.5 per cent to 88.2m barrels a day (the FT story is here) in spite of record high oil prices.

It also called for Opec to increase its output to avoid a tight oil market in the second quarter of the year. Oil prices, meanwhile, are rising.

The acceleration in demand growth of 1.5 per cent this year suggests that the traditional relationship between oil prices and demand is breaking apart. Or is it?

If you have asked the Energyfilter team five years ago what would happen with oil demand if prices averaged in any year $65 a barrel, the response would be: a sharp drop! For the record, Brent oil price averaged $66.1 a barrel in 2006 and so far this year the price average is $64.5 a barrel.

But prices still matter, although far less than they did in the 1980s and 1990s. Last year, the IEA also projected strong demand growth for 2007, only to be forced to cut that estimate as ongoing oil prices dent some of the consumption increase.

That transformed a forecast published just a year ago for oil demand growth in 2007 of 1.8 per cent to another now of 1.5 per cent. Still, that is peanuts if you think about how tight supply is.

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The International Energy Agency, the industrialized countries’ energy watchdog, on Monday warned on a crude oil “supply crunch” in the next five years on the combination of strong consumption and lagging supply.

The IEA said that “oil looks extremely tight in five years time” and there are “prospects of even tighter natural gas markets at the turn of the decade.”

Although the energy watchdog is not in the business of predicting oil prices, analysts said that the IEA’s balance of supply and demand pointed to a growing risk of higher oil prices to 2012. However, an increase in refinery flexibility and capacity could help to ease the price pressures.

In summary, here is the bad, the very bad, the good news and debate:

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Oil prices are being driven higher by a general dip in US petrol supplies, as Ed Crooks wrote yesterday. This is one of those counter-intuitive abnormalities that makes energy fun or frustrating, depending on your disposition. But it’s true, even though you may be hesitant to believe Abdalla Salem El-Badri, Opec’s secretary-general, because he has reason to want to downplay any blame attributable to the cartel, which has recently restricted its oil output to push prices up. See the AP story here. Instead, believe US refiners who are privately admitting to having trouble performing their regular scheduled maintenance on time, and for that matter on budget.

What is interesting is the reason: The general lack of parts and labour in a market of high demand that is making it more difficult to do everything from drilling new wells to retooling refineries. Now if only someone would come up with a better explanation than ‘psychology’ as to why refining less crude into petrol should drive crude prices up, rather than down. If you do, please do send us a comment…

Hani Abdulaziz Hussain, chief executive of Kuwait Petroleum, the state-owned oil company, will leave his post four months before his term was due to end, the Kuwaiti press reports. Mr Hussain met with Sheik Ali Jarah al-Sabah, the Gulf state’s oil minister, earlier this week to tell him that he wanted to resign, Al-Qabas newspaper reported. The minister accepted the resignation, the paper said, adding that he quit over of "lack of harmony" at the company. Kuwait, an Opec member, produces about 2.4m barrels of oil a day. In the past months there have been disagreements within Kuwait’s oil establishment over the size of the country’s remaining reserves as well as over whether to allow international oil companies to help Kuwait Petroleum stem the declining production of its northern oil fields.

Opec last month bet the diplomatic tensions over Iran would eventually be resolved, or so it seems by its actions. The oil cartel in March cut a further 200,000 barrels a day of its production to try to ensure that prices did not drop too far below $60 a barrel. The group’s active members, which are beholden to its quota system, now produce 26.31m barrels a day, according to a study by Bloomberg. Opec tracks its own production on a monthly basis, but exact data are difficult to come by because of the secretive nature  of some countries and the poor managerial capabilities of others. (World oil demand stands at about 85m b/d.)