It seems clear that more than a few people here could use some lessons on exactly what affects fuel economy. For starters, engine displacement certainly has some effect due to the reasons Clocker mentioned, and also the fact that you're lugging around more weight. However, it does not have as great an affect compared to other factors of vehicle design. To a first approximation, it takes a given fuel burn rate to develop a certain amount of power. Burning at higher tempertatures is more efficient, but all car engines are more or less similar in that regard. Some tweaks can make one engine more efficient over another, but I would estimate the differences are less than 25%. Good economy must start with the design of the vehicle, and here I must digress.
OK class, welcome to vehicle dynamics 101. All terrestrial vehicles require power to maintain a certain velocity due to drag. This drag, apart from any mechanical losses in the engine and drive train, has two components-rolling friction and aerodynamic friction. Static(zero velocity) rolling friction is equal to the rolling coefficient times the vehicle weight. Typical rolling coefficients are 0.015 for SUV tires, 0.01 for car tires, 0.007 for bus and truck tires, 0.003 for high-pressure bicycle tires, and 0.001 for steel wheel on steel rail(now you know one reason I like trains). Therefore, a 3000 pound car might have 30 pounds of rolling resistance while an 8000 pound SUV might have 120 pounds. There are additional rolling resistance losses as speed increases due to the flexing of the rubber. Typically, these additional losses are something like 0.01*static rolling friction*speed, so at 70 MPH the total rolling friction of the 3000 pound car is 30 pounds(static) + 21 pounds(dynamic), for a total of 51 pounds. While tire drag is significant(51 lbs at 70 MPH is 9.5 HP), it pales in comparison to aerodynamic drag, especially as speed increases. Aerodynamic drag is 0.0024*frontal area*drag coefficient*speed². Note the dependence on the square of velocity. Also note that when you convert drag to horsepower by multiplying by speed again, you find that the power required to overcome aerodynamic drag increases with the cube of the velocity. Yes folks, it takes 8 times as much power to break the wind at 120 mph than it does at 60 mph. Take our example of the 3000 pound car. Typical values might be a frontal area of 30 ft² and a drag coefficient of 0.3. Therefore, the aero drag is 0.0024*30*0.3*speed². At 70 MPH this is 106 pounds, or more than double the rolling friction. In total the car engine must exert a force of 106 + 51, or 157 pounds to maintain 70 MPH. In horsepower this is 157*70/375, or 29.3 HP. Now let's do the SUV. The rolling drag at 70 MPH is 120(static) + 84(dynamic), or 204 pounds. The aero drag is 0.0024*45*0.6*70², or 318 pounds(I used 45 ft² and 0.6 for frontal area and drag coefficient, respectively). Total horsepower to maintain 70 MPH is 522*70/375 or 97 HP. Now you know one reason I hate SUVs. There design is inherently abysmally inefficient. If only people who needed off-road or towing capability owned them, that would be fine, but they never should have been allowed to become as ubiquitous as they are.
Now on to part two. Vehicle drag is only one part of fuel consumption. Besides maintaining velocity, vehicles needs to change speeds. A vehicle moving at a given velocity has a kinetic energy proportional to the speed squared. For example, the 3000 pound car at 70 MPH has a kinetic energy of 0.5MV², or 667,841 joules(note the change to metric here). One horsepower is 746 watts, or 746 joules/sec. To accelerate the 3000 pound car to 70 MPH in 20 seconds requires 667,841/20 or 33392 joules/sec, which is 44.8 HP. Additionally, more power must be supplied to overcome the drag, so a more realistic total might be 65 HP assuming that 100% of the engine power reaches the wheels. Want to accelerate faster? You need more power. Regardless of the rate of acceleration, it takes a certain amount of energy to get back up to speed after stopping due to this kinetic energy. This is why heavy vehicles fare much worse under stop and go conditions with current designs. I qualified this last point because it is possible to recover this kinetic energy and use it to get back up to speed unlike the power to overcome vehicle drag which is lost forever. Currently, vehicle designers are for the most part choosing to ignore this fact even as they are producing heavy vehicles that would stand to benefit a great deal from it economy-wise. Commuter and subway systems have been using regenerative braking, as it is called, for years. The technology exists and should be taken advantage of.
As should be clear now in order to maximize fuel economy you need to reduce drag and recover kinetic energy. The first is quite simple and can be designed into vehicles by using low rolling resistance tires, reducing the frontal area to the bare minimum, decreasing the drag coefficient, and reducing weight(not as important as the other three). For our 3000 pound sedan you might be able to get frontal area down to 25 ft². Drag coefficient in a drivable vehicle can get down to about 0.12. Anything less requires impractical needle nose designs 50 feet long. Rolling coefficient of about 0.006 is also realistic. Put everything together and you now need only 15.7 HP instead of 29.3 HP to do 70 MPH without even reducing the weight. Throw in some weight reduction(to 2000 pounds) and you only need 13.8 HP. Bingo, your efficiency goes up by about a factor of two just by changing tires and sheet metal. Want to do even better? Try experimenting with laminar flow. A human powered vehicle using laminar flow actually covered a few miles at speeds of over 80 MPH(it officially went through the speed traps at about 73 MPH because the rider accelerated too soon and "burned out" before the timing trap). Note that a human can generate maybe 1 HP for this period of time. Extrapolating, it might be possible to make a drivable 4-passenger vehicle that only needs 5 HP to maintain 70 MPH using laminar flow.
The second way to increase efficiency is to recover your kinetic energy and reuse it rather than throwing it away heating brake shoes. You can recover about 80 to 90% with current designs. Besides saving wear and tear, such an energy storage system is also beneficial if you want to make a high-performance vehicle. No need any more for monster 400 HP engines when all you really need is an energy storage system that can deliver maybe a million joules in as short a time as possible. It makes little sense lugging around the extra weight and having additional friction losses when most of the time the engine will only be making less than 50 HP. Doing this you can have small engine running at a constant speed. Some power will be used to propel the vehicle, and the balance will recharge the energy storage system. The engine only needs to be big enough to supply the average power needed, not the maximum. Such a system is cumbersome if done mechanically, so the best way is to do away with the mechanical link between the engine and wheels. Put electric motors on all four wheels and control each independently to allow maximum power without slipping. If the energy storage system can deliver power fast enough and store enough energy, it should be possible to accelerate right at the limit of adhesion all the way to the vehicle's maximum speed, at which point the engine will supply 100% of the power needed to maintain speed. Today's mechanical transmissions barely deliver half the engine's peak power to the wheels on average when accelerating due to the engine being out of peak HP speed most of the time. With electric motors, you get nearly 100% to the wheels all the time and no need to bother with shifting. For instance, the Cadillac in this thread has 400 HP. With an electric motor system you could deliver 90% of this, or 360 HP, to the wheels when accelerating. Assuming the car weighs 4000 pounds with driver, this means a 0 to 60 time of 2.44 seconds(probably a bit more because adhesion limits power at lower speeds). Naturally, with my system you don't need a 400 HP engine at all, just a 50 HP one. The energy storage system takes care of the bursts. Besides all these advantages, a car with such a transmission can be easily upgraded to run on batteries or fuel cells once they become available whereas a conventional car would require more cost to retrofit for zero-emission operation.
Efficiency should be designed into all vehicles, especially expensive high performance ones. There are many precedents where a user pays a premium(i.e. ceramic tile, compact fluorescent bulbs, new windows) to buy something with the thought of saving money down the road. Cars should be no different. Just because a person can afford $30,000 for a vehicle doesn't mean he/she enjoys getting 15 mpg when the same vehicle can get 75 mpg without sacrificing one bit of performance. The difference over the life of the car(250,000 miles) is about 13,300 gallons of fuel which is about equal to the purchase price of the car at current prices. Certainly nothing to sneeze at even if you don't care about choking pedestrians with your exhaust.
