The negative externality caused by diamonds is tiny in comparison to the ones caused by fossil fuels.
For individuals, there are reasonable, cost-effective substitutes to reduce oil consumption. I take an electric train to work and walk everywhere else. I own a car, but drive it maybe once a month. People choose to drive, they choose to live in places like Silicon Valley where driving is part of the culture, they choose to live in suburbs, etc. We could use a lot less oil if people chose to life in places like New York. But the choice to live a car-centric lifestyle probably won't engender as much vitriol here on HN as the choice to buy a diamond engagement ring, even though in the grand scheme of things it's far more damaging.