Kyle's father, Gerald, buys a new hybrid Toyonda Pious, and drives around showing it off to everyone; he then begins an unwelcome campaign to convert the other townspeople to environmentally friendly vehicles. He has started to annoy his friend Randy, who complains that Gerald now talks with his eyes closed, and that he almost likes the smell of his own farts. Deciding that they cannot live among such backward attitudes, Gerald decides that the family must move to San Francisco.
Stan is horrified that Kyle is leaving, though Cartman is completely ecstatic, throwing a going away party for Kyle and not inviting him. Gerald tells him that the family will not return to South Park until everyone feels the same way as him about the environment. After they leave, Stan writes a song about the importance of hybrid cars, which gets on the radio and, incredibly, causes everyone to drive hybrids (and act as smugly as Gerald about it). Stan is praised for opening everyone's eyes, then meets Ranger McFriendly, protector of the environment, who criticizes and punches Stan in the face for what he has done; for, although smog rates are down, people who drive hybrids create a toxic gas in the air called "smug". South Park now has the second-highest levels in the country, after San Francisco.
In San Francisco, Kyle's father is glad to meet like-minded "progressive" people, who, mid-conversation, loudly fart, bend over and sniff with pleasure, then resume discussing their philosophies. Kyle finds it difficult to fit in with the other kids, who spend their time taking drugs to deal with their parents' "smugginess". Kyle refuses the offer of acid, but after seeing that his dad is even more arrogant than before (sniffing his own fart), Kyle asks for "maybe just half a hit," while Ike asks for three.
Meanwhile, Cartman, who was joyous over Kyle leaving, tries to fill the void by ripping on Butters, whom he now calls a "stupid Jew," but finds him too nice and unwilling to defend himself like Kyle. He quickly becomes bored without his nemesis around, as Stan had predicted.
The cloud of smug over South Park increases and begins to combine with that of San Francisco. In a series of scenes parodying the film The Perfect Storm, the reporter Keenan Williams then reveals that the cloud of smug from George Clooney's 78th Academy Awards acceptance speech — which claimed that Hollywood was "ahead of the curve" on social issues — will soon drift into the center of the "super cell" and create "the perfect storm of self-satisfaction", which would completely destroy San Francisco and South Park.
Stan is forced into helping the town eliminate hybrid cars, but Cartman — desperate to get Kyle back so he can resume hating and ripping on him — secretly goes to San Francisco with Butters, planning to infiltrate the city and rescue his foe. Afraid of San Francisco's liberal and hippie movements (which he hates), Cartman wears an "anti-smug suit" (connected to a hose with an air supply managed by Butters, the hose being ridiculously long since he's able to reach the city from the city limits with it still attached). Just as the storm hits, Cartman finds the Broflovskis in their house, completely stoned on drugs/"smug". The scene fades out. Later, the storm has destroyed thousands of homes in South Park, while San Francisco has "disappeared completely up its own asshole", leading everyone to think Kyle's family is dead; but the Broflovskis reappear, explaining they mysteriously awoke on a bus, and thanking a "guardian angel", not knowing that Cartman saved them.
With all their cars destroyed, the townspeople vow never again to buy hybrids. But Kyle points out that hybrid cars really are a good thing; the people who drive them should just not be smug about it, or act as if they're above everybody else. The people admit they are not ready to drive them without being smug - "it's simply too much to ask" - so they return to driving SUV and other high fuel consumption vehicles. Cartman talks to Kyle, and they get into a fight; as Kyle storms away, Cartman expresses relief to have the status quo returned.