In terms of aggregate usage, cars are by far the biggest transportation users, though, so are the main place to look if you wanted to reduce usage. In the U.S., for example, aviation used about 15 billion gallons of fuel in 2005, while road vehicles used about 175 billion, and rail used about 5 billion: http://www.bts.gov/publications/national_transportation_stat...
And what percentage of those gallons are used by people who have an option for mass transit and choose a car instead? A tiny fraction. The OP basically is saying that people drive their car instead of using mass transportation. There are a tiny group of people who choose to drive instead of use mass transit in the scheme of things.
I'm not a mass transit hater, my girlfriend and I use mass transit more than any other people we know. We drive to the bus stop together in the morning (5 miles), get on a bus, transfer to our respective subways once in the city, and make it to our sailboats on the weekend by train. There often weeks where we'll go 5 or 8 days without getting in the car other than to and from the bus station because we're either using buses, trains, or subways. We're not environmentalists per say, but it is far cheaper, faster, and convenient (especially when you are out at bars drinking and the other option is a taxi) than driving.
But I still need a car to get to the grocery store during the week. I still need a car when I want to go skiing. I still need a car to get to the movies. I still need a car to get to the library. I still need a car to visit my parents. I still need a car to go to a concert, or hang out with my friends.
But - almost all of my driving would work just fine with a plug-in electric car. The bulk of it is <20 miles each way. Some occasional longer trips will have to be dealt with. I see gasoline usage in cars as something that is basically a technically solved problem. Look at Better Place - they have figured out the system, or even some plug-in hybrids (although I think they are overly complex). It is just an inexorable transition that will be based on economics.
On the other hand, I just can't imagine a technology we have on the drawing boards today that is going to replace the jet engine in airplanes simply due to power density. We've had oil fueled airplanes from the start with 3 minor exceptions - solar power (prop only, basically no payload), rockets (not feasible on a large scale, and probably worse enviromentally), and molten salt cooled nuclear reactors (and even then I'm pretty sure it wasn't driving the plane, just testing in it). You can't use fuel cells or batteries for jets (you could for props, but that sucks), you can use biofuels but honestly is that any different? Personally I prefer my oil out of the ground instead of from ex-rainforest land or competing with the food supply.
So I see airplanes as the big technological problem.
For doing away with oil entirely I agree that airplanes are a big problem. But I don't think in practice they're a big one, because they don't use all that much oil. If all gasoline-powered cars disappeared, but planes were still on oil, our use of oil would plummet by >80%, so much so that our domestic oil production would actually be much more than we need.
As for people choosing to drive when there's public transit available, I think a lot of people do; certain much more than a "tiny" number. The main problem is that where public transit is available, it's often slower, so people prefer not to use it. For example, my brother lives within 2 blocks of a VTA light rail station in Santa Clara, and never takes it anywhere, even to places where the light rail actually goes. And when I lived within the Atlanta city limits, where there's fairly good public transit, almost nobody at Georgia Tech I knew took public transit. Even the people who lived within walking distance of a subway station didn't take it.
(Not saying those are irrational choices, just that a large number of people who don't take transit could, in the sense that it exists, but is often slower than driving.)
And frankly your alternatives for oil in power generation are coal and nuclear. Take your pick.