Light Oil is a petrochemical liquid product produced when processing Medium Oil in the Distillation (Stage II). It can be further processed in a Distillation (Stage III) machine to produce Naphtha and Fuel Gas. Alternatively, it can be burned in a Boiler (Gas) to generate Steam Hi , and thus generate Electricity.
The former option is much more common as it allows for the potential production of Rubber and Plastic from Naphtha, though notably both products can also be made using Diesel.
Burning Light Oil directly to create steam is a viable option before Naptha Processing is researched. However, using a distillation stage III machine to separate Light Oil into Naptha and Fuel Gas and then burning the two products separately produces significantly more energy than burning the Light Oil would