The best explanation for the observation of a variety of colors when sunlight strikes oil on the surface of water is:
C. The components of white light are refracted at different angles due to their various wavelengths.
This phenomenon is known as interference and refraction. The oil layer on the water creates a thin film, and as light interacts with this film, different wavelengths (colors) of light are refracted and reflected at different angles, leading to the observation of various colors.