Oil's stranglehold over transportation will be broken forever by hybrid car technology, according to Alliance Bernstein senior analyst Saurin Shah.

The long-term demand for oil from the transport sector was likely to fall "precipitously" by 2030, Shah told the MLC Implemented Consulting conference in Sydney yesterday.

He said fuel efficiency could increase by up to 50 per cent thanks to new technology, which would lead to a halving of fuel consumption by 2030.

"International Energy Agency estimates on fuel economy are far too conservative based on the technology at hand," he said.

"At the moment, the efficiency of road travel is very low with 85 per cent of energy wasted.

"An electric motor on the other hand loses only 20 per cent of its energy."

Widespread fears of oil production decline were exaggerated, and demand for cars that were a hybrid of petrol and electricity would lead to a dramatic increase in fuel efficiency and a fall in demand for oil, he said.

"Hybrids are a no-compromise solution. Rapid improvements in technology mean that hybrid cars are becoming more efficient, faster and roomier," he said.

Hybrid car sales in the United States have leapt more than 2000 per cent in the past five years from 9,350 in 2000 to 205,749 last year.

"The implications for this on oil demand will be profound," Shah said.

He admitted, however, that he did not yet drive a hybrid car.

The price of crude oil fell US$2.35, or 3.9 per cent, to US$58.68 a barrel on the New York Mercantile Exchange last Tuesday, the lowest close since February.