The problem is not that they are inefficient, it's that they don't scale.

Cars work well many places -- there are huge parts of the United States that were essentially uninhabited until the advent of the automobile -- but when density reaches a critical level they become impractical. That's why private automobile ownership is rare in places like New York or Tokyo, and motorized traffic moves no faster in central London than oxcarts did in the middle ages. Right now the Washington, DC area is going through a shift, as all of a sudden the traffic has reached the level where the automobile is no longer a reliable way of getting around. People are moving back into the city and exploring other ways of getting around; cycling has become quite popular. Traffic has much more impact on people's behavior than the price of gas.

Really the question is whether people are willing to live a higher densities. If the everyone in the US lived the way people in Manhattan do -- 67,000 per square mile -- we could put all 300 million of us into less than 5,000 square miles, or about the size of Connecticut. That could be a circle with a radius of 40 miles; you would be within a days bike ride of everyone in the country!

I have no doubt that such an arrangement would be far gentler on the planet. But I can't imagine people voluntarily doing it any time soon.