We, the people of earth, are going to run out of oil. When? Oh, does it matter? The fact is, oil is a limited resource, and we are using it at an alarming rate.
The world has experienced several oil crises in the past, and there is a good chance we will see them again in the future. At present, the price per barrel of crude oil has risen to above the US$70 per barrel mark. With oil prices the highest they have ever been, people are once again getting itchy: What happens when oil becomes Too Expensive?
It isn't as if we haven't seen hikes in oil prices before. In the early 80s, the oil price peaked at around US$38 per barrel, after the first major attacks in the Iran-Iraq war. In 1991 (the 1st Gulf war / Desert Storm), oil prices rocketed up to US$33.
In 2004, Hurricane Ivan trashed the gulf of Mexico, causing a sharp rise in the price of oil products, as several refineries were damaged. In August 2005, hurricane Katrina did damage to several oil refineries in the New Orleans area, resulting in an immediate price hike again.
The impact of high oil prices is wide-reaching. Just about everything in our everyday lives is impacted by the price of oil: It isn't only the oil (and thereby petrol / diesel etc) itself, but also products we make out of oil, including certain plastics, asphalt and tar etc.
Immediately, however, the main impact will be to us and our cars. Most internal combustion engines use a variant of oil (either petrol, which is a relatively light oil derivative, or Diesel, which is far heavier) to run about.
In Europe, the vehicles are in general smaller, and a lot more fuel-efficient than their US counterparts. It is easy to find (and cheap to insure) a 0.9 litre-engined vehicle which will use a minimum of petrol. Alternatively, picking up a small car with a refined Diesel power unit (such as the new 3rd generation Common Rail Injected Turbo Diesel engines) will send you upwards of 65 MPG (54 MPG(us)), which goes a long way to alleviate how harsh the oil price stings you. Alternative solutions, such as hybrid cars, electric cars, dual-fuel cars, alternative fuel technologies such as bio-fuel etc are also available, and many of them are government-funded in many different ways.
The difference comes, however, according to exactly how dependent a country is on their cars.
In much of Europe, if you are low on cash, one of the quickest ways to get rid of a large expense is to sell your car (which I, incidentally, am in the process of doing right now). Road tax, expensive petrol and insurance bills are instantly obliterated, and whilst the public transportation systems around Europe vary from "pretty good, actually" via "mildly annoying" to "not a very appealing prospect", they have one thing in common: It is quite possible to make do without a car, and certainly a hell of a lot cheaper.
The effect of this is that, in Europe, the government can get away with slapping serious taxes on petrol (in Norway, for example, 80% of petrol price is pure tax, going straight to top-level government). This is an incentive to use less fuel, which can be done in a multitude of ways: Drive less, drive more efficient cars, carpooling, or using public transportation.
In the US, the situation is vastly different: The country that spawned Henry Ford, mass production, and Detroit's ever-powerful automotive lobbys has an unhealthy addiction to its vehicles: A large number of people live in areas where not having a vehicle is not an option. The glaring absence of public transportation, combined with a legal framework that is unfriendly to the launch of new public transportation solutions both in the private and public sectors, means that there are no substitutions for the automobile.
Arguing for smaller cars is difficult, too: In a country where the Volkswagen Jetta (Bora in the UK and Europe, about to be re-labeled with its original Jetta moniker) is seen as a small car (it is a "small family car" in the UK), and where the roads are filled with SUVs and trucks, small cars are downright dangerous.
Any car can only ever be relativity safe: Due to those pesky laws of physics, a safe large car will always be more safe than a safe small car. Small cars have to be particularly safe, as there are so many hulking SUVs and trucks around, but it goes deeper than that: many trucks and SUVs are higher up, so if you were to ram into each other front-to-front, a large truck or SUV is likely to skim over the bonnet of a small car, continuing straight through the windshield, murdering the occupants instantly. Grim predicament, but true, sadly. In a country where family value and safety are taken to (from an outsider's perspective) borderline insane levels of pride, buying your child a VW Beetle is the same thing as wanting to stab them with a pitchfork.
Pride aside, the fact remains that choosing between a small or a big car, in the US, often means choosing between a new or an old car: The used car market is filled with 1970s Oldsmobiles that weigh three tonnes and get 10 MPG. Small cars are more difficult to find, certainly if budget restraints are in place. A corollary of this is that people who are well off can afford to buy hybrids or other economical cars, while people who are struggling economically are left with the scraps: The inefficient cars that use a lot of expensive petrol.
As such, taxing fuel as a luxury item in the US would be impossible: Even if the US were "only" brought up to UK fuel prices (at a jolly US$7 per gallon), the country would be facing some serious social problems: The people who could afford it would ditch their (now too-expensive-to-run) SUVs in favour of smaller, more economic models.
It can be argued, of course, that if the bourgeoise goes for efficient cars, that the overall petrol useage of a country could go down, which would limit demand. Basic economics would then dictate that the petrol price should start a downward fluctuation, which would be of benefit to the whole nation, even those who couldn't afford to get economical cars the first time around.
Perhaps an option would be something like a fuel card system where the first 10 gallons every month are non-taxed, and everything above that is taxed on an linear scale would solve the problem to a degree, but opens a whole array of possible ways of fraud.
If taxing fuel is not an option, how else would you limit people's use of their automobiles? In the UK, it was recently suggested to fit all cars with trackers, which would replace the road tax with a pay-as-you-go system. Needless to say, people are uneasy about the thought that the government can track their every move, and in the US (where government is extremely weak, in comparison to their UK counterparts), such a solution would probably cause riots - and no president or senator who had any wish to stay in office would ever be seen to suggest such a thing.
The last conceivable way of taxing, is by taking a levy on the new cost of a vehicle. There are several ways this could be implemented, such as per engine size (smaller, more efficient engines are taxed less than heavier gas-guzzlers), vehicle weight (lighter vehicles per definition use less petrol), vehicle price (in effect a luxury tax) or otherwise.
Taxing vehicles only works if it means that the tax incentives means that people would choose a more efficient vehicle over one that isn't efficient. It is a plan that could easily backfire, however: In the US, vehicles are very much status symbols, and the higher price could increase the perceived exclusivity of less efficient cars, actually boosting their sales. Far worse, people could decide to save just a little bit longer before they replace their old cars, which means that the age of the average car on the road goes up - with more pollution and lower fuel economy on the whole as a result.
With a situation where you cannot effectively tax the usage of petrol (you don't want to punish people who cannot afford to buy efficient cars, because not having a car is effectively not an option), you can't track which usage is necessary (to and from work) or luxury usage (holidays, road-trips), and you can't tax vehicles in a way that would reduce the use of petrol, we are back at square one.
Thoughts about a solution
Lobbying (or statutory requiring) the automotive industry to change things seems to be the bare minimum of what needs to be done: Further research and rapid production of cheap, efficient petrol and diesel engines appears to be low on the priority list, because there is little demand. I feel that perhaps it is time that the US government created such a demand, through creative application of taxes - maybe that would stir the car builders into the right direction.
Far more importantly, however, is the building of a wide-spread public transportation network, which does away with the dire need of owning a car to get to work etc. Due to US geography, this sounds like a big challenge indeed, but if there is a will, there is a way: Bus and coach terminals, train lines with passenger services, combined with smaller (16-seater?) shuttle busses that go into the more remote areas where people live would be perfectly doable. Expensive? Sure. But ultimately a lot cheaper than a complete melt-down of the domestic economy, which is where the US currently seems to be heading.