I agree that gas taxes should not be increased. I think they should be lowered actually.
Demand for gas, however, is relatively inelastic. No doubt many people are changing their driving habits. However, demand for gas and oil is not declining in any similar proportion, if at all, to the increase in cost. Demand does not change as much for gas and oil as it does for other goods with similar percentage price increases.
If the price continues to rise, demand will certainly decline to some extent or at least in certain segments of the market, but it will decrease more slowly than the price increases.
If gas prices increase and people do not expect them to decline or expect them to keep increasing, they will begin to change thier habits and maybe even consider fuel costs as a factor in where they live as you explained.
Full disclosure: I'm not an economist.
