Extremely worried!!!

Yup. Definitely caused by the oil.
Should not be used to on a snake since it does cause their scales to soften and flake off. The discoloration is the top layer of his scales coming off. (Think of it like removing the top clear coat of a car)

As for not eating, how large is he?
It is normal for mature males to go off feed for months in the winter due to the breeding season.

The mineral oil was used around 2 months ago. He actually just shed perfectly tonight, all in one piece, but he's still blotchy and pinkish. I am going to have to take him to the vet and see if they can do tests for parasites without a stool sample, since he won't eat..