I think with all the fuel price hysteria going on, too many people forget that, unlike past fuel panics, a substantial chunk of America is comprised of well-heeled, affluent customers who aren't affected by pricey fuel. Granted it may come to a point where driving a too-excessive vehicle can carry a negative social stigma, but V8s and powerful engines aren't exclusive to big cars. The Corolla-sized BMW M3 is hardly a fuel-sipper!
This is why I think GM insane for cancelling the Ultra project. If GM is serious about taking Cadillac truly upmarket, it'll need a serious, highly-sophisticated V8 to remain competitive. The Northstar's a fine unit, but it's dated and has reached its limitations. Dropping a 6.2 truck unit in a flagship sedan would solidify Cadillac's image as nothing more than a tarted-up dumpstermobile. The brand is supposed to be aimed at wealthy buyers, who demand the best of everything they own, not at NASCAR fans.
I look around my 19th-century New Orleans neighborhood, populated primarily by well-heeled successful professionals, and I haven't seen much downsizing in the car arena. The Denalis are still there. The Lexii are still there. The Benz R-classes (a particular favorite here) are still there.
People who spend $35,000 for living room curtains simply aren't fazed by $4 gas. And unless GM just wants to hand this demographic over to the imports on a silver platter, it'll need a big, sophisticated V8 model to cater to them. Anything else simply won't suffice.
Unless the economy tanks so bad that my neighbors end up on skid row, V8s aren't going anywhere.