A blacksmith wishes to cool his hot piece of steel as rapidly as possible. He has a bucket of ice-water and a bucket of oil (at room temperature). Which bucket should he dump his steel into?
Materials have many properties that are unique to them, and help people separate or distinguish materials from one another. One of these properties is called specific heat capacity, and it refers to the amount of energy that is required to affect a specific temperature change to a specific volume (I believe in SI units it is the number of Joules required to change 1 gram by 1 degree). This is the property which will govern this situation, as the process of cooling is in fact simply an energy transfer, from the hot steel to the cool liquid.
I am not aware of the relative values of the specific heat capacioties of various oils or water, but I do know that the value of water is considered very high in general, so I would suspect that the values of most oils (if not all) would be less than that for the water. This leads to my belief that water would be a better coolant in this case. Further to this is the temperature difference. Thermodynamics says that the rate of cooling between materilas of different temperatures is proportional to the temperature difference. As the oil is a t room temperature and the water is at the freezing point (20 C less), the rate of cooling would initially be faster based on this characteristic when using the water.
Finally, the actual material used since man began turning iron into steel is in fact water, done in a process called (if I remember coprrectly) Martinizing. This process makes the steel stronger but less durable (flexible) than it would be if slow-cooled.