Oil is cheap, easily accessible, and can have a wide range of viscosities as needed. It can also have whatever vapor pressure we want it to up to fairly high temperatures.
Coolant oils also tend to be chosen to limit flammability. Again, we have a lot of control over the properties of oils because there are so many kinds.
A good coolant needs to be liquid at certain specific temperature ranges, a good thermal conductor, non-corrosive and cheap.
We can’t use water because it corrodes the metal pipes we store it in, it boils and explodes at a relatively low temperature and it freezes and explodes at a relatively high temperature.
Oil is great because its liquid at a wider range than water is(even more with certain additives), protects the pipes it’s contained in and is fairly cheap.
The flammability of a coolant doesn’t matter if the coolant is never exposed to anything to oxidize with. Case-in-point, many (most?) larger rocket engines, as well as the SR-71 blackbird, used **fuel** as a coolant.
Oil is used because it’s cheap, you can basically dial-in a particular set of chemical and physical properties for whatever application you’re dealing with, the oil will lubricate and seal the system very well, and oils tend to be very good at accepting heat.
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