It would later be named “margarine”. Whereas butter is made from the butterfat of milk, modern margarine is made mainly of refined vegetable oil and water, and may also contain milk. In some locales it is colloquially referred to as  oleo , short for oleomargarine.hree types of margarine are common: 1  Soft vegetable fat spreads, high in mono-or polyunsaturated fats, which are made from safflower, sunflower, soybean, cottonseed, rapeseed, or olive oil. 2  Margarines in bottle to cook or top dishes. 3  Hard, generally uncolored margarine for cooking or baking.