A question regarding oil

Something floats or sinks in a fluid depending upon its buoyancy, which is the relation
between its density and the density of the fluid it is in.  The original Archimedean
definition of buoyancy states that an object will float if it weighs less than the water
displaced by it.  More precisely, if an object has less mass than an equal volume of
water, i.e. it is less dense than water, then it will float.  Conversely, if something is
more dense than water, it will sink.

The ratio of the mass of a substance to that of an equal volume of water is called the
specific gravity.  The specific gravity of a liquid can be measured easily with a
hydrometer (a sealed glass tube with weights at the bottom), which will sink lower in
less dense liquids or float higher in more dense liquids.  Hydrometers are used in the
food industry to determine the amount of sugar, salt, alcohol, etc. in many drinks.

If you put a hydrometer into oil, you will discover that the oil is much less dense than
water.  So, if you pour oil and water into a container, the water will sink (because it is
more dense than the oil) and the oil will float (because it is less dense than the
water).  Even liquids that are miscible (that can be mixed together) can form layers if
their densities are far enough apart - in the lab we often mix alcohol and salt water;
at first the less dense alcohol floats on top of the more dense salt water, but after a
few shakes, they mix to form a single solution.  Another experiment that we do in the
lab involves chloroform:

Chloroform is more dense than water, so water will float on top of chloroform.

Oil and chloroform are miscible, and the mixture is more dense than water.

If you fill a test tube with first chloroform, then water, then oil, you will get three
layers:  oil on top, water in the middle, chloroform on the bottom.  Now if you fill the
tube first with water, then oil, then chloroform, when the chloroform contacts the oil,
they will mix, and the water will float up through the mixture to form the upper of two
layers.

I hope this helps explain the relationship between density and buoyancy.