Like when someone was digging on their land and this black oil started to spring, what did the person think of it? Was there any significance to it? Did they get upset that their land is getting contaminated and they didn't find the water they were looking for or what? These days if you came across some oil on your land, you would be elated as if you won the jackpot, but how was it before oil became big?
"Rock oil" was well known for centuries before its first commercial application in the west. It seeped from the ground in Persia, parts of the Russian empire, and elsewhere. It was used as a caulk for boats and as a medicine. It was perhaps generally considered almost valueless but not a particular nuisance. It was known that it would burn but it wasn't particularly useful as a fuel in its unrefined form.
No one was drilling at all, really, so finding it instead of water wasn't an issue. The Chinese had learned to drill for salt but as far as I know no one was drilling for anything else, or even anything at all for several centuries.
The first oil rushes and booms were for oil that would be converted to kerosene, not gasoline. It was "the new light." It was a major revolution and John D. Rockefeller and Marcus Samuel, cross-Atlantic rivals, led the business early on.
Contamination wasn't a concern. To the extent crude oil is toxic, either no one was aware or no one cared.
You should read The Prize by Yergin.