Oil on spark plugs, also called oil fouling, is commonly caused by failing valve stem guides and bad stem seals. As pressure builds up in the crankcase, excessive oil enters the combustion chamber through worn-out piston rings or cylinder walls and forces its way to spark plugs. Oil fouling can also be caused by transmission fluid sucked through malfunctioning vacuum modulators or leaking lubricants from engine turbochargers.
The most common sign of spark plug fouling is engine misfires, explains How Stuff Works. Oil blocks the electrical current needed to create sparks that combust fuel, leading to poor performance, higher fuel consumption and bad emissions. Misfiring engines shake badly during idling and can be felt throughout the vehicle. The excessive vibrations can cause engine mounting eventually to fail.
Extreme cases of oil fouling can cause hard starting, engine stalling and ignition coil failure. The ignition coil is connected to spark plugs by high-tension wires and sends surges of electricity to fire the plugs. Oil-fouled plugs send the surges back to the ignition coil instead of its normal path. These surge backups can push ignitions to failure.
According to AAA1Car.com, oil-fouled spark plugs are easily fixed by sanding the deposits and wiping them with a clean cloth, though replacing them is a better option.