Get about as oiled as a diesel train
Gonna set this dance alight
"Oiled as a diesel train" is used as a euphemism for getting very, very drunk (diesel trains, as one might expect, need to be well-oiled).
It also ties into the next line. Oil can be very flammable, and the revellers are going to get so oiled that they metaphorically (and perhaps literally) set the place alight.