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Rules for magic oils are in the Magic Items - Potions section of the core rulebook, pages 477-478.
You make them using the Brew Potion feat.
Applying an oil is a standard action to smear the oil on the target (note, throwing does not work) or a full-round action to apply an oil to an unconscious creature. The person applying the oil is the caster and the thing receiving the oil is the target. Despite some wording in this section, you can apply an oil to a creature if the spell can target creatures.