My wife drives a 2005 Prius (I drive a 2004 Mazda 3s) . She usually bicycles to work, but when we drive somewhere we usually take the Prius to save on gas. Last weekend we drove out to "The Farm", which is some land her parents own about an hour south of Nashville in a rural area. We averaged 50.6 miles per gallon on the drive back from The Farm (it's mostly highway driving). We usually get around 45 to 48 miles per gallon in the Prius. I think this is pretty darn good.
The Prius has insulated us somewhat from the rise in gas prices. A trip to the farm uses about 1.5 gallons. While this costs us $6 now, as opposed to $3 just a few years ago, and while this is a doubling of our gasoline bill, it's still very small. If we were to drive my car it would use about 2.5 gallons, and cost $10, versus $5 a few years ago. If we road with Liz's parents in their land yacht, it would cost $14 to get to the farm. So the two way trip costs $12, $20, and $28. Gas prices would have to rise to $8 per gallon before we would start feeling the pain that Liz's parents feel. This is unlikely to happen soon.
In addition to the wonderful fuel economy, the Prius has other nifty features. It has an LCD screen that controls all the electronics (stereo, climate control, etc.) and gives great feedback on how one's driving affects fuel economy. It is also spacious (and a hatchback), holding five people and lots of stuff quite comfortably. It is not fun to drive in the way my Mazda is, but it is competent and confident on the road. The Prius fits handily into small parking spaces and turns very tightly. I can actually parallel park it with ease, something I normally find difficult. Buying a Prius on purely financial grounds probably doesn't make sense for most people at current gas prices. As protection against higher prices, and as a really nice car all-around, the Prius makes a lot of sense. Oh, and Consumer Reports rates it very highly for reliability.
I have seen some confusion and concern about the life of the batteries. While the batteries are not terribly environmentally friendly, they do have a fairly long life. They are warranted for eight years or 100,000 miles (whichever comes first), and should be expected to last a good deal longer than that (in California the warranty is 15 years/150,000 miles). When last I checked on this, Toyota claimed they had never replaced a Prius battery due to use (as opposed to damage in an accident). Priuses have been used as taxis for a while now, surely racking up lots of miles. A google search for "how long will the Prius battery last?" seems to suggest that it should last at least 200,000 miles.
This brings me to the long-term effects of gas prices. There is a standard list of effects that could occur when gas prices go up:
-People buy more fuel-efficient cars (some are just smaller, some use new technology).
-People combine trips.
-People bicycle or take alternative (possibly public) transportation.
-People move closer to work.
-People move to cities where everything is closer, and away from rural areas with their longer driving distances.
-Developers build more integrated communities (e.g., a condo tower with a grocery store on the bottom floor).
-Automobile manufacturers invest in improving old engine technologies and developing new ones
I'll leave out discussion of what oil extractors and refiners might do (basically, they try to extract and refine more oil). In some sense, we should expect the U.S. to look more European, in terms of how people travel and where they live. Some of these changes will take more time than others; cities do not change their layouts quickly.
This brings me back to the Prius. To the extent that cars like the Prius shield consumers from higher gas prices, they will slow the other forms of transition. If automotive technology gets good enough, fast enough (or if people all shift to really small cars) then the other more structural changes may occur very slowly, or not at all. People may keep living out in the country, but all drive small hybrid cars instead of pickup trucks (or maybe someone will come up with a small hybrid pickup truck to allow a rural citizen to maintain his or her country credibility). It's difficult to forecast exactly what will happen, since it depends greatly on peoples' preferences--their willingness to substitute between different ways of dealing with higher gas prices.