With the world awash with too much crude oil at the moment, the fear of an economic catastrophe when fossil fuels start running out is quietly fading in the background.

The prediction is known as peak oil — what happens when crude oil extraction hits its maximum and supplies begin a steady and permanent decline creating a global shock.

But now the peak oil argument is fast losing currency as global supplies of oil vastly outstrip demand, pushing the US benchmark price toward 30 US dollars a barrel.

Shane Oliver, chief economist at AMP Capital Investors, said the supply and demand table has well and truly turned on the once vocal peak oil advocates.

"They've been talking about a peak in the global production of oil for the last two decades now and it still hasn't happened, and I think the reality is that they are going to remain wrong going forward," Dr Oliver told the ABC's AM program.

Analysts now say oil demand is likely to fall before peak oil production is reached, thanks in part to electric vehicles. ( Supplied: Tesla )

"Therefore the catastrophe that was predicted by the peak oil advocates, where oil production would peak and there would be huge economic impact globally, that just won't happen."

The peak oil argument has confronted a new global reality - or a new normal - driven by major geopolitical and economic factors rocking both the developed and developing world:

US shale producers are pumping like never before and adding to stockpiles.

US shale producers are pumping like never before and adding to stockpiles. With US sanctions lifted, oil-rich Iran is about to rejoin the global market.

With US sanctions lifted, oil-rich Iran is about to rejoin the global market. The OPEC oil cartel is refusing to tighten supplies to keep prices high betting that US producers will produce themselves out of business. Solar thermal plant developer predicts sunny future An Australian company says its new solar thermal technology could produce power more cheaply than coal. Read more

AMP's Shane Oliver believes that, rather than facing a peak oil shock, consumers and industries will continue to move away from fossil fuels in an orderly manner as a wider range of renewable technologies get closer to affordable reality.

"What's going to happen is that oil production globally will at some point peak but it's going to be because the world has moved away from oil towards the use of other things," Dr Oliver told AM.

"The electrification of automobiles and greater efficiency in the use of oil will drive a decline in the demand through time anyway."

Dr Oliver said that, rather replicating a shock in the 1970s when OPEC restricted supply, the globe is undergoing a quiet revolution that will see the world requiring less oil.

"Only a decade ago I was being told that I've got to get rid of my car and replace it with a horse and buggy. That prospect appears as less likely," Dr Oliver said.

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"The reality is the days of the internal combustion engine using oil are numbered, and I won't be getting rid of the car and getting a horse and buggy - I'll perhaps be getting a car with an electric engine."

Dr Oliver points to developments in battery life such as those used in the Tesla electric car.

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"The technological innovation that we've seen in batteries and electric cars generally is mind blowing," he added.

This morning, West Texas Intermediate crude had a rare bounce to $US36.66 a barrel, but there are predictions the price could dip below $US30 next year as the global oversupply deepens.

The focus in 2016 will be on OPEC's resolve in maintaining supply and the potential impact as China's demand for oil weakens as its economic growth continues to slow.

Follow Peter Ryan on Twitter @peter_f_ryan and on his Main Street blog.