It seems to have the characteristics of a negative production externality:
The market for petroleum creates a negative effect (putting it very mildly) on third parties. This cost is not incorporated into the producer's supply curve and as a result is not reflected in the market price of petroleum products. As such the market price and quantity of petroleum can be considered inefficient. That is, the market outcome does not result in maximum gains to society.
So, does Pigou's solution to negative externalities apply here? If so, how would it be put into practice?