That sounds like it might be ghee, or clarified butter.
Ghee will solidify though. I imagine that if it was actually still liquid that it’s some strange product that involved centrifuges or something.
Well, it was 1977/78 and I was 16/17 at the time. So I don’t know.
It was a bit weird, but why would they send ghee to welfare recipients/foreign countries? Much of it went to companies that used it to make crackers and such, but some of it got labeled in Welfare style containers.
There was even a line where you had to put the steel cans on a weird twisty assembly line and if you put more that 3 cans on the line in an hour that had dents you got sent home for the day. These were the cans they put the butter oil in.
Googling for “butter oil”, I found an Amazon listing for the stuff. One of the customer questions and answers says, “Ghee is heat extracted and high vitamin butter oil is centrifuge extracted without heating and retains more nutrients and vitamins. Its luke the difference between pasteurized milk and raw milk. Different nutrient profile.”
(And from reading the reviews there, some people were buying the stuff as some sort of medicinal thing, like for tooth pain.)
And sorry for the hijack but until you posted, I hadn’t heard of butter oil.
I’ve heard of butter oil, because we used it at Pizza Hut when I worked there in the 1980s. It was also the “butter” that most movie theaters used; my brother and sister worked at an independent arthouse that put REAL butter on their popcorn, and people would come back and say, “What’s this stuff all over my popcorn?” 
Maybe it went to aid organizations?
My grandmother was automatically eligible for commodities in the 1980s because she was on Social Security, and had a habit of being first in line on distribution day. All of them (cheese, butter, honey, and other things at time) were more than she could use, so she would give some of it to my parents, who passed some of it on to me, and even to my other grandmother, who was also eligible but didn’t participate because she felt she didn’t need it and wanted people who did need these things to get them first. She did not, however, refuse anything my parents gave her.
And a decade before that, when I went to Girl Scout camp, we sometimes prepared meals using canned government surplus beef, per the label. That stuff looked, smelled, and probably tasted like dog food, although cooked over a campfire, it did become marginally edible.
I used beef like that to make curry when I was camping on the Isle of Man, way back in 1976. It was actually quite good—no one suspected it came out of a tin.
Curry will make anything taste good
For my entire life, I’ve always thought of generic brands as synonymous with store brand.
One of my Grandmothers also got that stuff. The government peanut butter was really good. Had a different texture than other PB. A bit drier kind of like what’s in a Resses.
My school would give us peanut butter and honey sandwiches which I’m pretty sure were made with commodities. They were good.
Our school didn’t actually make peanut butter and honey sandwiches, but they had loaves of bread and bowls of peanut butter on the table for most meals (as a supplement, it wasn’t the whole meal). The farm boys would wolf down their goulash or fish sticks and then load up on three or four peanut butter sandwiches. Occasionally they also had honey dispensers. Until now, I didn’t consider that they were government commodity issues, but I bet they were just that. I remember seeing the #10 cans in their kitchen area, and the loaves of government cheese, so I know they were using generic government food.
I don’t think Kroger owned every other local chain back then like they seem to nowadays, but the Kroger-branded stores had a Cost Cutter brand with yellow packaging and a Helvetica-like font in a mix of lowercase (a, e, m, n, r, u) and small caps (the others), kinda like DIeT COLa or Beer or LamBruSCO.
I liked the packaging back in my youth (I was 8 for most of 1980), but the inconsistent weight between the lowercase letters and the others looks sloppy to me nowadays. (Of course, Kroger has a history of wacky typography…)
When my mother was growing up during WWII, she usually went home for lunch (it was literally across the railroad tracks from the school) but they did serve lunch, and that lunch was often peanut butter soup, which was exactly what it sounded like - peanut butter mixed with milk, or more likely water, and heated up. Even the kids who were on the verge of starvation wouldn’t eat that.
A local ethnic market has a product labeled “Peanut Butter For Soup” and I think of this whenever I see it.
In the early '70s after my older brother moved out, he quietly gifted the rest of the family with a partially eaten economy-size jar of generic peanut butter made with (IIRC) soy oil. I didn’t mind it so much, but my younger brother (age ~8) refused to eat it, saying “Huh. It doesn’t taste like our peanut butter!”
I’ve had peanut soup at a Thai restaurant that was awesome. Of course, there were a lot more ingredients than just peanut butter and water!
Indeed! My daughter is a vegetarian. She made us dinner last weekend and it was scrumptious! A west African meal starting with peanut soup.
When I was a little kid, a visiting priest preached the sermon at mass one Sunday, and he described getting served a bowl of banana soup in Africa.
The fish biscuits were delicious.
My mom would sometimes make us peanut butter surprise for breakfast - a soupy, hot mixture of peanut butter, milk, and I think some sugar. She grew up with very little, so I am sure it was a meal learned out of frugality.