Objection 1. It would seem that olive oil is not a suitable matter for this sacrament. For this sacrament is ordained immediately to the state of incorruption. Now incorruption is signified by balsam which is contained in chrism. Therefore chrism would be a more suitable matter for this sacrament.
Objection 2. Further, this sacrament is a spiritual healing. Now spiritual healing is signified by the use of wine, as may be gathered from the parable of the wounded man (Luke 10:34). Therefore wine also would be more suitable a matter for this sacrament.
Objection 3. Further, where there is the greater danger, the remedy should be a common one. But olive oil is not a common remedy, since the olive is not found in every country. Therefore, since this sacrament is given to the dying, who are in the greatest danger, it seems that olive oil is not a suitable matter.
On the contrary, oil is appointed (James 5:14) as the matter of this sacrament. Now, properly speaking, oil is none but olive oil. Therefore this is the matter of this sacrament.
Further, spiritual healing is signified by anointing with oil, as is evident from Isaiah 1:6 where we read: "... swelling sores: they are not... dressed nor fomented with oil." Therefore the suitable matter for this sacrament is oil.
I answer that, The spiritual healing, which is given at the end of life, ought to be complete, since there is no other to follow; it ought also to be gentle, lest hope, of which the dying stand in utmost need, be shattered rather than fostered. Now oil has a softening effect, it penetrates to the very heart of a thing, and spreads over it. Hence, in both the foregoing respects, it is a suitable matter for this sacrament. And since oil is, above all, the name of the liquid extract of olives, for other liquids are only called oil from their likeness to it, it follows that olive oil is the matter which should be employed in this sacrament.
Reply to Objection 1. The incorruption of glory is something not contained in this sacrament: and there is no need for the matter to signify such a thing. Hence it is not necessary for balsam to be included in the matter of this sacrament, because on account of its fragrance it is indicative of a good name, which is no longer necessary, for its own sake, to those who are dying; they need only a clear conscience which is signified by oil.
Reply to Objection 2. Wine heals by its roughness, oil by its softness, wherefore healing with wine pertains to Penance rather than to this sacrament.
Reply to Objection 3. Though olive oil is not produced everywhere, yet it can easily be transported from one place to another. Moreover this sacrament is not so necessary that the dying cannot obtain salvation without it.
Source: Summa Theologica (New Advent)