Prices for petrol in Aus have hit as high as $1.48 a litre. The average is about $1.40. Whilst it all sounds very scary, in some regards I think its time that we caught up with the rest of the world.
We have some of the cheapest petrol on the planet.
Our national fleet, on average, is one of the largest in terms of engine capacity, and one of the least economical. In fact, our fleet economy in 2003 is identical to that in 1963.
Many other countries have additional taxes and tariffs on larger capacity vehicles. We do not. In fact, it could be argued that we have a reverse scenario: Large 4wds do not attract as much tax as a family sedan.

• Germany's tax components increase with engine capacity
• UK has a tax reduction for cars under 1200cc
• Italy has a threshold at 2000cc
• Japan has the 'kei-jidosha' class of up to 660cc

There are numerous other nations with similar rules.

In the 70's, the average Holden Kingswood 3.3l 6 cylinder had a paltry 100kW (140hp) and it was considered a 'staple'. People pulled caravans and travelled the continent with them. Even the high-performance V8s of the day had less power than the current Commodore's 190kWs.
Most 2-2.5 litre-class cars such as Camrys, Sonatas, Accords, Mazda 6s all have more power than an early 1980s Commodore 6, which was similar in size.
If a car of a certain size and power is considered a 'norm' why is the modern equivalent not considered that norm?
The 'norm' appears to more revolve around the number of cylinders, than its size.

While the 'family six' is still considered a staple driving diet, it has in fact increased in dimensions and power significantly.

So whats happening here? Are we simply consuming cheap petrol and hang the consequences? Do we have an addiction to horsepower?

Most likely the answer is yes. Increases in the efficiency of cars has not lead to a smaller capacitied, fuel efficient 'norm', it has allowed the 'norm' to increase in size and horsepower instead.

Personally, I'd like to see a capacity-based tax applied. It would have to be introduced over a span of a decade, slowly reducing the average capacity from near 4.0litres down to 3.0litres.
Perhaps some relief for small cars under 1.5 litres instead of relief for large 4wds...