From The Encyclopedia of Mormonism
Author: Hoskisson, Paul Y.
Olive oil is used by members of The Church of Jesus Christ of Latter-day Saints in blessing the sick and in performing initiatory ordinances in the temple. Before oil is used, it is consecrated in a short ceremony. An officiating Melchizedek Priesthood bearer, holding an open vessel containing pure olive oil, consecrates it by the authority of the priesthood and in the name of Jesus Christ for its intended purposes. The oil is then stored and used upon occasion as required.
The use of oil in religious rites can be seen in the record of Old Testament times, when it was used to anoint objects (Gen. 28:18-19; Lev. 8:10-12), as an offering (Ex. 25:1-6), and to anoint priests (Ex. 29:7; Lev. 21:10-12) and kings (1 Sam. 10:1; 16:3). In the New Testament, oil was used to anoint the sick (Mark 6:13; James 5:14).
Two New Testament parables illustrate possible symbolisms of oil both as a therapeutic ointment and as a source of light. The good Samaritan, finding the injured traveler, "bound up his wounds, pouring in oil and wine" (Luke 10:34). In another parable wise virgins "took oil in their vessels with their lamps" and thus were in possession of material to provide light, to celebrate the coming of the bridegroom, Christ (Matt. 25:1-13).
The reason for using olive oil rather than any other kind of oil is never clearly stated in the scriptures. To say that olive oil is preferred because it is the oil indigenous to the Holy Land would be simplistic. A more likely explanation results from examining the wide range of meanings symbolized by the olive tree and the oil derived from the olive fruit, the only major culinary oil that is derived from a fruit. The olive branch has long been a token of peace. The olive tree is used in scripture as a symbol for the house of Israel (Hosea 14:6; Rom. 11:17; Jacob 5; D&C 101:43-62). PAUL Y. HOSKISSON