> Oil is still underpriced wrt to its environmental cost.

This may well be true, but we still haven't found a better fuel. Sure, we have electric cars, but they are still too expensive for the masses, or impractical, e.g. for apartment dwellers. Besides, oil has countless other uses besides as fuel for vehicles.

There's no incentive to find a better fuel as long as the price of oil doesn't have the externalities priced in.

Yes, and, the world would be better off if the price of oil were higher. We would produce less plastic crap and take fewer frivolous airplane trips and take more public transit. Our petroleum consumption is based on underpriced oil.

This could be an argument for investing in more reliable/higher capacity public transit systems though. Which would also likely result in a fair increase in public health from moving a bit more and possibly less polluted air going in an out of the lungs of the populace.

> but we still haven't found a better fuel

We have. It's electric.

China makes them cheaply enough.