I feel I must address some statements on here from an engineering and scientific standpoint rather on the standpoint of economics, because as much as economists think they know things, really, they can't do squat if we can't engineer it.
As for burning fumes increasing gas mileage, incorrect. We already only burn fumes, gasoline is only flammable in a gaseous state, it evaporates then burns, light a can of it on fire, it burs slowly from the top.
We still have a good 60-70 years of oil left, they have been finding more deposits of it and also producing it in new ways from things such as oil shale and the like. However, this is not to say we need to stop worrying about running out now, we definitely don't. Ethanol is a fair stop gap, as long as it isn't corn ethanol. There are many new ways to make ethanol in the works, one of them being switchgrass which produces much more ethanol per acre than corn. There is also ways to harvest oil from algae. New ways to use algae to filter CO2 from smokestacks are being investigated, the algae takes the CO2 from smakestack emmissions bubbled through water filled tubes and the algae grows. It can then be harvested everyday and made into oil to be used in cars and other vehicles.
Electric cars are the future in some form, whether it be hydrogen fuel cells or cars you charge at home. As of now the USA has enough coal to power our country for 200+ years. This energy can be used to make hydrogen cheaply for new cars now while we research alternative fuels for electricity production. Also, electric engines are not nearly 99% efficient, 85%-95% at best, even transformers, a lot like engines bit hve no moving parts, are aroung 97% and that is without moving mechanical parts as stated. Another thing that is being worked on heavily is batteries with increased storage capacities and the ability for quick discharge like a capacitor. They have made headway on them, but there is still a lot to be done. The biggest advances coming for electricity are solar/thermal and wind. As of now wind turbines re in the ~50% efficiency range, if we can increase that to ~80% or so we will have a lot of power. Also, the Sun provides the Earth with enough Solar energy everyday to power everything on Earth for years to come, and thats in a single day. If we can harvest that we are set.
So, in the end this is not going to come down to the economists, it is going to fall on us engineers.