Ideally, the Holy Oils given to each parish by the Bishop at the Chrism Mass are completely consumed through their normal use in anointings during the year. The new oil received at the current year’s Chrism Mass replaces the oil from the previous year.
When there is Holy Oil left over from the previous year, it should be disposed of with care and reverence.
One way is to burn the old oils. This may be accomplished by reverently burning them in the Easter Fire at the Easter Vigil or at some other appropriate time. It is not fitting that the Holy Oils be burned along with trash or other non-religious refuse. Cotton balls or another absorbent fabric can be used to soak up the oil. The cotton is then burned and any ashes buried into the ground near the church.
Another option is to use a sacramental oil burner. Meyer-Vogelpohl has one that is beautiful enough to use for prayer. Click here to see more details about this sacramental oil burner.
The Archdiocese of Seattle liturgy office has some good guidelines on how to dispose of Holy Oil and also how to clean your oil vessels:
What is the proper way to dispose of old Holy Oils?
While the revised Code of Canon Law contains specifics on the use of the Holy Oils blessed by the diocesan bishop and distributed at the Chrism Mass, it does not contain explicit instructions for disposal of Holy Oils from the previous year which are being replaced.
The Book of Blessings, Chapter 32, Order for the Blessing of a Repository for the Holy Oils, Introduction, paragraph 1127 states: “Each year when the bishop blesses the oils and consecrates the chrism, the pastor should see that the old oils are properly disposed of by burning and that they are replaced by the newly blessed oils.”
Burning the old oils may be accomplished by burning them in the Easter Fire at the Easter Vigil Mass. It is not fitting that the Holy Oils be burned along with trash or other non-religious refuse.
An alternative to burning is burying the unused oils in a sacred place. A fitting place would be on the church grounds. This can be accomplished by digging an appropriate size trench along the foundation of the church. This trench should be at least 12 inches deep and of a size that the oils will not be evident on the surface after the trench is filled. There is no environmental concern as the oils and chrism essence are non petroleum base and will eventually be absorbed into the ground.
If the quantity of oil is so large that burying them on the church ground is not feasible, then an alternative place to bury the oils is a Catholic cemetery near a statue which identifies the cemetery as Catholic or in the area where priests and religious people are buried.
A corollary subject is the cleansing of the ambry vessels or other containers that contained the old oils before newly blessed oils are added.
Ambry vessels and old containers should be cleansed with hot soapy water to dilute the olive oil and essence of chrism. This soapy water should be emptied into the sacrarium or emptied directly into the ground next to the church in a similar manner and location as recommended for burying old oils. After it appears that all traces of the old oils have been removed the ambry vessels and containers can be cleansed and dried in a normal fashion.