It’s my understanding that currently, because of the relative low cost of motoring, a high percentage of cyclists are actually relatively well-off – economics lecturers and the like . They cycle because they choose to rather than because they have to.

Surely much better if you can further encourage cycling via good infrastructure because it is socially better and more convenient for everyone, regardless of income, despite motoring remaining relatively cheap.

Of course, as you point out, eventually congestion eventually decreases the opportunity cost of driving, especially in cities. However, because of the infrastructure increased motoring also has various negative effects on cycling (and some public transport) – it too becomes less convenient and cycling is much more dangerous on congested roads. You don’t have to charge more for petrol, but if like the Dutch, you make cycling more convenient and pleasant, partly at the expense of the driver, then you can make towns nicer for everyone.

Of course, closing though-routes to drivers and slowing traffic down might not be popular with some people either.