It's not a stretch. You could do that with today's technology relatively easily. It would just lead to a lot of slow (less displacement; less horsepower), sluggish (taller gearing) cars (less cargo space) that cost significantly more (lightweight, costly materials). Right now the market doesn't demand anything quite that drastic, but if gas were to shoot up 300% of its current price, you might see companies starting to churn out something just like that.
Take a 2012 Ford Fiesta for example. It has a 1.6L I4 rated at 120 HP, and has a curb weight of around 2600 lbs. It currently gets an estimated 29 MPG city and 39 MPG highway. Change out all feasible steel parts for aluminum, fiberglass, carbon fiber, etc. Move to a smaller, less powerful engine, and tune the gearing accordingly. Now we might end up with a car that has a 1.2L I4 rated at 90HP, a curb weight of around 2000 lbs, and fuel economy in the 35-40 MPG city and 50-60 MPG highway range. The biggest difference is that the current Fiesta costs around $15,000 (depending on trim and options), and the new one might cost more like $25,000, or more.
All of those numbers are just speculation, of course, and the car would be dog-slow and expensive for what you get, but if gas prices skyrocketed, people would pay for it.
