With nearly a million troops arrayed in the Middle East because of a conflict that began over oil, some environmentalists see oil fading as one of the world's most important products.

"The end of the fossil fuel age is now in sight," said a study by Worldwatch Institute, a private group financed by United Nations organizations and private foundations."While oil dependence may seem inevitable and permanent, it could turn out to be shorter than the 200-year age of coal," the report said.

Oil is a danger to peace, a dangerous pollutant and not that cheap, argued Christopher Flavin, vice president of the institute. He is co-author with Nicholas Lenssen of "Beyond the Petroleum Age: Designing the Solar Economy," a pamphlet made public Saturday.

He said the choices in the future will be either a gradual transition from oil, encouraged by government policies and market forces, or a sudden emergency shift amid economic and social chaos.

The American Petroleum Institute, which represents the industry, disagreed.

"The U.S. Department of Energy forecasts that 40 years from now oil will still contribute almost the same proportion of America's energy supply that it does today," it said in a statement.

"In the future, energy from solar, wind and geothermal sources may indeed become more important components of the U.S. and worldwide energy mix. However, it would be a mistake for the United States to pursue policies to exclusively stimulate these technologies," the oil institute said.

Worldwatch urged replacing oil by different forms of solar energy: not only photo-voltaic cells that make sunlight directly into electricity, but windmills driven by air currents caused by different levels of the sun's heat and the burning of plant material nourished by the sun: wood, sugar cane waste and other forms of "biomass."

Norway, though an important oil producer, already gets more than half its power from other sources - electricity produced by its abundant forests and water resources, Worldwatch said.

"Many of the machines and processes that could provide energy in a solar economy are now almost economically competitive with fossil fuels," Worldwatch said.

It calculated that in 1988 windpower electricity cost only 8 cents a kilowatt hour, in areas where it is practical, particularly Denmark. That is about its estimate for the average cost of all forms of electricity. It said geothermal energy, another way to produce electricity in some limited areas, costs only about half as much.

But its figures show the cost of direct electricity production from the heat of the sun will come close to the 8-cent level only at the end of the century.

Robert J. Lieber, a professor of government at Georgetown University, said the United States should reduce oil imports and use different sources of energy but that the policies of the past 10 years have moved the country in the opposite direction.

"Solar energy in many forms can have significance over the long term," he added. "The problem is: How do we get from here to there?"

He suggested that solar energy should not be considered a "magic bullet" but one of many ways of reducing dependence on the oil of the Middle East.

World Resources Institute, another environmental group, issued a report last week favoring development of cars that run on different fuels, to "prevent future Persian Gulfs."

It noted that BMW and Mercedes Benz in Germany have produced cars powered by hydrogen, for research purposes, and that General Motors is already selling an electric van. Hydrogen produced from water would be a cheap and abundant fuel.