Is there a way to dilute oil?
It doesn't actually dissolve. It disperses (easily seen as some will eventually settle out). The distinction is important, as dissolving could be solved by time or heat.
A few things may help when mixing with water (or milk):

Make a paste with the powder and a little water, then dilute
(this is what I do for protein shakes) Put a little water in the bottle. Add the powder on top and put the lid on. Shake briefly but vigorously. Add more water to about 1/3 full, shake again. Top up to 2/3 full, shake a final time. If you insist on using a blender, a similar approach might be good. It stops the clumps forming stuck to the sides where they're hard to get free. This is normally with whey derivatives. I've tried it with a plant-based powder but it was too disgusting to drink.
I've never used them (because they wouldn't fit in the bike bottles I use for shakes) but there are mixing balls. They're basically a whisk made of wires and makes the shaking more effective.