Question: May one dispose of the remaining oil used for lighting Chanukah candles?
Answer: One should not use oil (or wax candles) designated for lighting Chanukah candles for any other purpose, such as for eating or lighting Shabbat candles, since this oil has already been designated for the Mitzvah of lighting Chanukah candles; thus, one must not use it for any other purpose. Rather, one must burn the remaining oil on its own, with this burning serving no alternate purpose.
When we say that one may not use the leftover oil for a mundane purpose, this does not refer to the oil remaining in the bottle; rather, this refers to the oil that remains in the glass cups of the Chanukah Menorah. Only this oil should not be used for a mundane purpose or disposed of. Similarly, those candles remaining in the box have not become designated for the Mitzvah of lighting Chanukah candles; only those candles which were actually lit as Chanukah candles should not be used for any other purpose.
Some say that it is only prohibited to make use of the remaining oil when the candles were extinguished within a half-hour of being lit, for they were designated for their Mitzvah for a timespan of a half-hour. However, if the candles stayed lit for more than a half-hour and then went out, no sanctity rests on the remaining oil and one may use it for whatever he pleases. This is indeed the opinion of Maran Ha’Bet Yosef.
Nevertheless, some disagree and write that even if the candles stayed lit for more than half-an-hour, sanctity still rests on the remaining oil and wicks. Thus, one should make a “condition” before the onset of Chanukah and delineate clearly by mouth that he is not designating the oil and wicks for their Mitzvah. In this way, one may use the remaining oil and wicks for whatever he pleases according to all opinions (See Chazon Ovadia-Chanukah, page 160 and Torat Ha’Moadim- Chanukah, page 126).
Summary: It is proper to make a condition before Chanukah or even during the days of Chanukah that one does not intend to designate the oil and wicks for the sake of the Mitzvah. In this way, no sanctity will rest on the remaining oil and wicks and one will be able to use them for whatever one wishes.