I ran your quoted phrase through my subscription to WestlawNext(tm), which is the same costly legal research system used by every state and federal court of appeals and supreme court in the USA, and every major U.S. law school, and the system returns zero results. Which means that either your premise is false, because there is no such California law; or, you were paraphrasing a premise, perhaps to the effect that where there is no product, there is nothing to warranty. Regardless, there is no law that prohibits a person from offering a warranty on service, and it's quite common with motor vehicle service contracts.
That said, in your hypothetical, the oil additive is a product, so even if we assume that your premise were true, there is a product that can be warrantied. And, it is established beyond dispute, aside from the existence of a warranty, that where a product is defective in design, manufacture or warning, and it causes personal injury or property damage as a result, that the injured party is entitled to recover for the economic loss, as well as for any damages that are a natural consequence of the injury.
So, if an oil additive were to damage an engine drive train, which fails as a consequence of the failure of the additive, then the manufacturer could be held liable for all of the damage. Most manufacturers expressly disclaim any liability for consequential damages caused by their products -- but, even with said disclaimers, a court may award damages.
The most well-known example is the Ford Bronco Rollover lawsuit. Damages can be enormous, regardless of any warranty disclaimers.
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