In my expert opinion I'd have to say that no, the air isn't drugs and we aren't hallucinating. If this were true, that would mean that other psychedelics would give you the same effect as breathing air. Hallucinogenic drugs are under the same class so doing any of them couldn't be valid for what the world is actually like, because breathing would be the same thing as taking mushrooms, lcd, mdma, etc. And if we went into the harder drugs, cocaine, heroine, meth, etc. Those drugs give you different effects and continued use will kill you. You can't think while on those drugs, you can't see sometimes, and the feeling you get is good for a short amount of time and then you feel like shit. That honestly couldn't be what real life is, we would all be dying at increased rates than normal.
And then THC, and CBD give you different effects, euphoric, tired, happy, motivated, but alas it isn't what life is all the time, it's a drug, and drugs alter what you feel, see, etc. So again, in my opinion I'd say that this is very unlikely. Even if there was a drug like this, how would it have been spread over the whole world, how would they continue to pumping it into the atmosphere and how did it get there in the first place.