There is an interesting account of "healing with oil" @ http://awaitingrain.typepad.com they note:
"If you ask one of these ecclesiastical oilmen why they perform this greasy little exercise, they will undoubtedly tell you that the Bible instructs them to do so in James 5:14&15.
The Biblical use of oil is then explained: "The oil most often referenced in scripture is olive oil. And it was used for a variety of purposes, most of them having nothing to do with anything "spiritual." Olive oil was used in the ceremony of anointing a king. But most often you find olive oil being used as fuel for lamps, to cook with, for cleansing and refreshing the body, and for medicinal purposes.
"Are any of you sick? You should call for the elders of the church to come and pray over you, anointing you with oil in the name of the Lord. Such a prayer offered in faith will heal the sick and the Lord will make you well."
Other passages are then examines to better understand the common uses of oil and hopefully put the James passage into a more common-sense context.
16When you fast, do not look somber as the hypocrites do, for they disfigure their faces to show men they are fasting. I tell you the truth, they have received their reward in full. 17But when you fast, put oil on your head and wash your face, 18so that it will not be obvious to men that you are fasting, but only to your Father, who is unseen; and your Father, who sees what is done in secret, will reward you. ~Matthew 6:16-18
7"Then all the virgins woke up and trimmed their lamps. 8The foolish ones said to the wise, 'Give us some of your oil; our lamps are going out. 9" 'No,' they replied, 'there may not be enough for both us and you. Instead, go to those who sell oil and buy some for yourselves.' ~Matthew 25:7-9
45You didn’t greet me with a kiss, but from the time I first came in, she has not stopped kissing my feet. 46You neglected the courtesy of olive oil to anoint my head, but she has anointed my feet with rare perfume. 47“I tell you, her sins—and they are many—have been forgiven, so she has shown me much love. But a person who is forgiven little shows only little love.”
33But a Samaritan, as he traveled, came where the man was; and when he saw him, he took pity on him. 34He went to him and bandaged his wounds, pouring on oil and wine. Then he put the man on his own donkey, took him to an inn and took care of him. 35The next day he took out two silver coins[a] and gave them to the innkeeper. 'Look after him,' he said, 'and when I return, I will reimburse you for any extra expense you may have.' ~Luke 10:33-35
12They went out and preached that people should repent. 13They drove out many demons and anointed many sick people with oil and healed them. ~Mark 6:12-14
The theological point is summarized: "Nowhere in scripture do we find that oil is used as some magical potion to accompany and empower prayer. But we find plenty of scriptures explaining the very practical uses of oil in every day life, including use as a cleansing, refreshing, and medicinal compound".
A practical example is the conclusion: "Remember when you were a child and you had one of those golden opportunities to stay home from school because you were too sick to get out of bed? And do you remember how good it felt to have mom come in and rub some Vicks Vapo-Rub on your chest and throat? Could it be that what James was suggesting in verse 14 of chapter 5 was the simple, kind, and thoughtful act of using oil to soothe, comfort, and relieve the symptoms of illness while prayers were being offered for their healing? And if so, then could it be that we have, in our religious fervor, perverted the simplicity of prayer with silly superstition?"