I've been doing some dwarven mines, but I cant seem to find the usage of the dwarven oil. Can you make an item out of it?
Dwarven Oil is an alchemical ingredient as @Stof said. Other items like Dwemer Plates and other scrap parts can be smelted to produce dwarven metal from which you can produce dwarven armor with the proper perks (or just sell them).
Some parts are also involved in some quests.