This liquid is commonly found in the Asphalt Mines. It may cause people to slip much like slime does. It is also highly flammable. It is mostly used as ammunition for the flamethrower and as fuel for Combustion Cells, Rocket Skates and Gyrocopter Backpacks.
Oil can potentially be used to make enemies slip; alternatively, one can raise the temperature of an enemy by laying oil on the ground and waiting for the enemy to walk near or on it. One can then proceed to set the oil (and enemies) on fire via thermal grenade, flamethrower, or the flaming hands & pyrokinesis mutations.