Oil is essentially any liquid (at room temperature) that does not mix with water. In Sonic the Comic, it usually refers to crude oil or lubricating solutions.
The most plentiful source of oil on Mobius is in the Oil Ocean Zone, an area so polluted from Doctor Robotnik's factories that the water has been replaced by oil. Not only is the ocean covered in the substance, but occasional traps spurt oil onto the surface that easily catch fire. Sonic the Hedgehog once fell into a pool of this oil and couldn't easily move. An Aquis Badnik set the oil and the surrounding area on fire, but Sonic survived by turning into Super Sonic. On another occasion, Robotnik threatened to detonate a bomb that would have ignited all of the fire in the Zone, terribly polluting the planet. Once again, Sonic turned into Super Sonic as he fell towards a flaming oil pit. Similarly, Sonic ignited a pool of oil that had leaked from an Arachbot in order to torch the Prime Badnik.
An oil of a slightly different type is the favourite tipple of Megadroid. A female Megadroid in Pomfret-on-Sea also enjoys a can of oil and was served it by Megadroid in the Computer Repairs shop. Unfortunately, Megadroid had forgotten to oil his joints before leaving the Sonic the Comic offices and was unable to dance. Drinking oil has been shown to have intoxicating effects much like alcohol for a human. A Trooper that had drank too much accidentally revealed to Sonic that "Robotnik" that was attending his party was actually a bomb.
In Sonic the Comic Online, master polluter Tyson Dense had created a gun that fires hot oil. After Windy Wallis had coated the door of a vault in Metropolis Zone Central Bank with ice, Dense suggested using his weapon to melt the door. Although The Leaf knew the dangers of mixing hot and cold, Bob the Plax wasn't listening and used the hot oil, destroying most of the bank (but not the vault).