Jairus Banaji's 'Theory as history' mentions an instance from the late 1800s where Groundnut (Peanut) produced in southeast Maharashtra (India) was exported to Marseille and Italy where it was used in the manufacture of Olive oil. Is this still the case? to what effect is it used? and if it isn't the case why did it stop? Is there not enough production of peanuts in Italy that would have made this more economical? I understand that since India was ruled by the British back then so that might have made it cheaper but to what extent really?
I cannot answer for Italy, but here is what happened in France.
For the context: in the nineteenth century, "development of the European peanut oil industry was stimulated by a worldwide shortage of fats after the Napoleonic wars, an increase in population, a rise in the standard of living, and a new working class" (Pattee, 2005). In France, sources of edible oils were limited in the early 19th century: poppy oil in the North, walnut oil in the Centre, and olive oil in the South (Pierrein, 2013). British and French soap and candlemaker had become increasingly dependent on foreign sources of oil supply since the 1830s. Peanuts, sourced from West Africa and India, were found to be a very good source of lipids suitable for food and industrial use. By 1899, 17 factories in Marseilles were crushing about 200,000 tons of peanut seeds. An equal volume was being processed in Britain and other European countries (Pattee, 2005).
Now, what was this oil used for? Two articles from 1890 in La Gironde (a local newspaper from Bordeaux, where a good part of the French oil industry was, and still is, located; Bordeaux traders were importers of West African peanuts) provide us with some interesting data. The imported peanuts were crushed locally, yielding three different oils. The lowest grade oil ("third pressure" or "factory oil") was used to make soap (notably in Marseilles for the manufacture of the famous "savon de Marseille"), lubricants, and lighting oil. Highest grade oils ("first pressure" and "second pressure") were used as edible oil or to make margarine, a butter substitute that was becoming popular in the late 19th century. But one major use of food grade peanut oil was indeed to be mixed with olive oil, which was produced in Europe and North Africa. Several reasons were cited: it improved the shelf life of olive oil, it sweetened the taste of certain olive oils, notably Italian or Tunisian ones, that consumers found too "fruity", and it allowed to target certain prices (La Gironde, 18/2/1890).
Olive oil was indeed much more expensive than oils from grains and seeds and adding cheaper oils allowed some oil manufacturers to sell the mix at nearly the same price as pure olive oil. The publication of the La Gironde article led to an outcry of French olive oil producers who claimed that, while the practice existed, they considered it as "rude and fraudulent" (La Gironde, 27/2/1890). However it was generally acknowledged that most of olive oils sold in France contained from 5 to 30% non-olive oil: peanut, sesame, poppy, and mostly cotton oil. Just like wine, butter, and milk, olive oil had become the target of more or less honest oil manufacturers, particularly in Marseilles (Le Matin, 10/07/1891, La Souveraineté nationale, 5/11/1896). Interestingly, this is not the only narrative: by the end of the 19th century, olive oil (which had been the major edible oil in Southern France) was losing ground due to the competition of seed oils, made edible thanks to new refining technologies, but these new edible oils were found "tasteless", so mixing them with olive oil, as done by Marseilles oil manufacturers, was meant to make them more attractive to consumers (Pierrein, 2013).
The problem was widespread enough that analytical methods were developed to detect fraudulent olive oils (Bellier, 1901). At the beginning of the 20th century, Marseilles oil mills provided more than 60% of the national production of edible oil. These establishments were dependent on groundnut oil, and their success was largely due the production of mixed groundnut-olive oils, known as "fine" oils. Fatty, not too fruity and cheap, these oils accounted for two thirds of French consumption in 1904, according to some estimates (Gaston-Breton, 1998). It took several attempts to try to regulate the issue, but a law was eventually passed in 1910 that forbid using the name "oil of [seed or fruit]" to sell an oil that was not exclusively made of that seed or fruit (La Loi, 28/7/1910). This did not make mixtures of oils illegal, but the seller had to be make clear that its was not "pure" oil.