Ponyboy is experiencing a conflict between his looks and himself.
The conflict in the passage is an internal conflict. When a literary character experiences conflict inside of them, that is an internal conflict.
Ponyboy wished that he looks like Paul Newman who appears tough. However, Ponyboy does not look tough. He then goes on to consider himself not bad looking though as he justifies his looks by saying that "I have light brown, almost-red hair and greenish-gray eyes".
Ponyboy does not like his looks too much because he compares his looks to Paul Newman and wants to look like him. He is not content with his looks but also justifies that he is not bad looking either. He himself is not sure whether is looks good or not. Thus, he experiences an internal conflict between his looks and himself.
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