Ok, I hadn't watched it in a while. If that were the case the fumes probably would have caused a flashover, unless the concentration was above the UEL (upper explosive limit), in which case the oxygen levels would be too low and everyone would have asphyxiated. Hollywood suspends science quite a bit. Still enjoy the movie.

Not necessarily. While it is capable of burning, it isn't necessarily going to just go up like gasoline. Some petroleum based fuels have much higher flashpoints than others. Gasoline for example has a flashpoint (the temperature where the liquid will burn when exposed to an ignition source) of roughly -45 degrees F, while diesel fuel has a flashpoint that ranges from about 126-205 degrees F. Under normal conditions you can throw a match in a puddle of diesel and it will not ignite, when under the same conditions a gasoline puddle will easily be ignited.
And in Last Crusade, you see the bad guy igniting the whole place by dropping a match into it, and the fire spreading as if it were gasoline. And the same guy emerges without even getting his moustache singed.
Also, all these years, and no one noticed the smell?

Not necessarily. While it is capable of burning, it isn't necessarily going to just go up like gasoline. Some petroleum based fuels have much higher flashpoints than others. Gasoline for example has a flashpoint (the temperature where the liquid will burn when exposed to an ignition source) of roughly -45 degrees F, while diesel fuel has a flashpoint that ranges from about 126-205 degrees F. Under normal conditions you can throw a match in a puddle of diesel and it will not ignite, when under the same conditions a gasoline puddle will easily be ignited.

impossible for them to breath
and for the rats too.
"He's dusted, busted and disgusted, but he's ok"

Yes, it is by all accounts ludicrous!
The petroleum should have caught fire at the drop of the first spark from that torch.
As a side note, it should have been more or less impossible for them to breath in that petroleum fume filled cave.

Yeah that always struck me as odd considering a bit of his torch falls off right into the water,errpetroleum and should have lit it all up. Nowadays they would probably CG that out so it's just a mistake n the filmmakers' part.