I agree with you Paradox about it like water getting hotter and hotter and boiling more and more. I still say there is a limit but it will not be seen all at once since the price of gas is not going to $4-5 per gallon very quickly but inching its way there. Eventually you have to reach that limit. With minimum wage going up a lot of that money will be going towards the increase in gasoline rates.
The oil companies are just shooting themselves in the foot as this will cause alternative fuels to be released quicker.
And more hybrids... Gas has gone up 15 cents in two days in my location (to $3.10 / gallon) and I saw an interesting article in the paper today that indicates Toyota wants every vehicle on it's lot to be a hybrid by 2010. From my understanding (a co-worker that owns a Prius), the gas mileage is around 47 - 53 miles per gallon. My vehicle gets about 18 miles to the gallon, I drive it 250 miles a week (round trip) to and from work. With a hybrid, I'd only have to fill up about once every three weeks. Sure, $5 / gallon would still be pretty heavy, but if I were only paying it once every three weeks, I wouldn't complain as much.
Maybe that is part of the point behind the hybrid revolution with our "money-hungry oil-owning politicians". Just give us vehicles that give us more mileage and they can charge $5 / gallon or more because we won't have to complain as much about filling up as often at the high prices.
The real alternative probably still lies in alternative fuels. We just need the right people in office and the right minds coming up with the alternative fuel -- it can be done and, once it gets to a certain point, it will begin to happen more quickly. I'm with the other poster, though, there will still be existing problems with older cars, buildings, etc.