Usually its better to talk about torque than horsepower in street cars, but everyone thinks in terms of horsepower so I tend to just post in those terms.
Octane levels were not lowered on federal mandate directly. What was outlawed was "lead." That boosted effective octane levels. Without "lead," gasoline has a much lower octane. There is no law prohibiting 100 octane unleaded gasoline. Most people don't care about power as long as their car goes down the road. For how most people drive they really only need 2 cylinders. The 1000+ horsepower Veyron is only using about 50 hp traveling along at 60 mph.
Variable cams/lifters, multi-valve heads, direct cylinder injection and computer management allows notably flat horsepower and rpm curves - mainly because motors now can put out radical amounts of power that is computer limited. Since the power is being "held back," the motor can reach its allowed torque and allowed horsepower and stay at it for a very long time. I don't have the numbers in front of me, but for the Merc we have - a 385 cid V12, it has a flat torque curve in factory form covering 2200 rpms, its that at very low rpms (I seem to remember 1600) and doesn't fall off all that much to it's leisurely (for a V12 of that displacement) 5900 rpms. The horsepower is also almost as flat. It is a car that in OEM form was built to be able to cruise the Autobaum 186 mph hours on end.
Tetraethylenelead or whatever its real name is very health destructive. You would not want to get it straight on your skin. Many cities do have terrible "smog" problems - LA the worse - but even elsewhere if you drive into many huge urbans you can see the grey haze of the air over the city before you see the city. Bad air is a seriously health problem and it's not just greenies that say so, but also doctors.
The technology is amazing actually and it has been interesting looking back over the history of mechanical development, particularly watershed models that enhanced technology - or inhibited it - and how that intertwined with politics. For example, GM shifted in the mid 60s from opposing federal regulations to supporting them. Ford had just spent a billion dollars on new generation motors - the Cleveland (notably the huge port heads) and the boss 429 plus the "cammer." The 351 Cleveland had the future potential for 500 cid and the 429 for over 600. Mopar also was going for horsepower, but internally questioning "the ethics of putting 500 horsepower motors into taxi cab chassis' and selling them to teenagers." (CEO of Chrysler). Their designs inherently couldn't meet EPA standards. As for safety, you could run a 928 into a brick wall at 60 - and it wouldn't even crack the windshield.
But more, GM never got over the Corvair matter, that GM has poured piles of money into including to target the Euro market. GM figured regulations here and abroad would kill nearly all fot he many hundreds of small car makers - and they were right about that. They could not afford the testing or retooling.
GM wanted to take out Porsche, a thorn in the side of Corvette sales, when Porsche was nowhere near it's size now, and GM wanted to take out VW, which competed with the economy cars, plus there were other rear engined car makers they wanted to take out. If GM couldn't have a rear engined or air cooled motor, then no one else should be able to either. So GM used its legislative muscle in a push to get rear engined cars outlawed for emissions and safety reasons.
Porsche is one of those companies that has intensely loyal, wealthy followers (why else would anyone buy one at their prices?) and they poured money into Porsche for a new model concept - basically ground up builds and the first truly advantageous computer systems too. The front engined water cooled 4 cylinder 928 quickly became the 944 and the turbo 944, plus the luxury ultra high performance 928 2+2 4 seater coupe - no turbos - with advanced fuel injection and so fast it would not only blow away any Vette, it was faster than 2 seat aluminum Ferraris and Lambos - and got good mileage, handled fantastic and rode comfortably.
Although costing more than the average house and 3 times the price of a Vette, Porsche lost money on every 928 which were virtually hand built - and kept making and improving them for 2 decades.
While the reason did mean anything to people, this was Porsche making a huge threat to GM and every other car maker in the world. Porsche had the patents. The 928 motor was exactly 1/2 a turbo 944 - literally used the same heads. And the 944 met all regulations. That meant that Porsche only had to put two turbos from the 944 onto the 928 - already the fastest production car in the world - and the 928 would become a 600 horsepower monster in the mid 80s at a time when GM's hottest Vette made all of 270. So GM gave up it's war against rear engined car - plus they now had the Japanese to content with and their the laws they had helped to get passed hurting them.
When production stopped on the 928, Porsche buried it. It has no respect and they are only minimally tolerated somewhere in the back at a Porsche car show. A 928 4 valve from the 80s will still blow away a boxster.
The evolution of cars and particularly motors is very interesting. Other than the rotary, the same basic motor has been built for over 100 years. How old is the SBC? It does back to the 265, right?
Leaded fuel is never coming back, nor should it. It is too poisonous. People want the cheapest gas they can get to get them where they are going. If they have 70 hp that'd be enough for 90% of
them.
The American muscle car is back and in a big way - though their ads a bit deceptive. One definition of a muscle car is affordability. So they won't have top performance components. However, because so many are sold aftermarket parts are cheaper so they can be built up cheaper. The Merc I have has ultra exotic valves, oil sprays underneigh each piston to cool them off, independent water cooled thru independent radiators, Very complex direct cylinder injection - and the list goes on and on. So the car was (new, we got it used) exorbitantly expensive. Still, for a fraction of the costs, a person could make a V8 Camero fastest.
How much of a percentage of fuel economy do you think cars could make on unleaded 87 octane gas than they do now by eliminating EPA regulations other than about "leaded" gasoline? They can go 12.5 compression on 91 octane. I think that is has high as old super muscle cars ever went on 110 octane super premium leaded fuel. The Merc we have has 22 psi boost into 8.5-1 compression on 91 octane unleaded.