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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