To Avoid use of oil? Are you serious? Raising concerns about people polluting the moon through use of oil/coal/natural gas/any other carbon based burning makes about as much sense as raising concerns about scuba divers burning down an underwater kelp bed. How exactly would you go about burning ANYTHING on the moon given it has 1) no Free oxygen (or atmosphere at all for that matter), and 2) no natural reserves of anything that we would call fuel (no oil, no natural gas, no coal; in fact carbon in general is rather scarce there). You would have to import oil from earth, and then you would need to provide your own oxygen for it, which you would either have to ship from earth(way expensive), or refine it from the lunar rocks (requires some other energy source to get the oxygen out, much simpler/cheaper to just use it directly).
The fuels we use on earth are only viable for us because there are large amounts of them just lying around, plus a huge supply of free oxygen everywhere to burn it with. The nice thing about being on the moon is that these "dirty industries" will not exist simply because there is no viable way to make them there. The way it looks right now, solar and nuclear(fission or fusion) power are the only feasible ways of powering a lunar outpost.
Concerning the feasibility of Moon colonization: the way I see it, the only way a Lunar outpost would ever amount to anything more than a dozen people or so (like the ISS), is if there were something on the moon that, all things considered, could be procured more cheaply than it could on earth. People can and have colonized and thrived in the most inhospitable of places, but no group ever did so simply for the sake of making a colony, there was always something there that made the difficult adaptation worth their wiles.
There are a few things on the moon which could theoretically be such a resource. Some have suggested mining helium 3, quite rare on the earth, more plentiful on the moon, which is theoretically useful for very efficient nuclear fusion, as well as being useful now for certain cryogenics experiments. It currently carries a price tag of over $42000 / ounce, developing a working power generation system using it could increase demand, driving that price up ever further and sustaining it there.
Another is the prospect of solar power satellites for powering earth. The idea is simple: sunlight on earth is blocked by clouds, the atmosphere itself reduces the radiation received at the surface, and that pesky little thing called night happens all the time and blocks the sun out altogether. But if we put a really big array of solar panels in orbit around the earth, where the sun always shines, and then beam the power down to earth with microwaves, we now have a solar power station that will produce large amounts of energy all the time, with functionally infinite room to expand the system. Earth's electricity problem (and all the pollution that comes from it) would disappear. All the technology for this currently exists, most of it for quite some time. Trouble is, getting things from earth to space is hard (ie, expensive) due to earth's high gravity and thick atmosphere. Launching off the moon, with it's low gravity and no atmosphere, is a snap by comparison. So build a moon base, make materials for solar power satellites, and then sent them back to earth orbit, all more cheaply than building the same satellites on earths surface and launching them up.
These two seem the most plausible to me, most likely both of them in conjunction. And who knows? Maybe there are other resources on them moon which can be procured there more cheaply than on earth, the Apollo mission literally only scratched the surface in a few scattered places, any colonization effort would certainly discover a lot of things that were previously overlooked. No matter what resource you are going there for, you still need one more thing, a lower cost method of getting things from the earth's surface into orbit. The current price ranges from $4000 - $30000 per kg of cargo, so much that the above listed schemes just aren't worth it over terrestrial sources. But if that launch cost was to come down significantly, say to $300 - $500 per kg, suddenly the notion of making solar power satellites starts looking mighty nice compared to other kinds of power generation, as does extracting costly materials from the moon instead of mining them on earth.
Schemes of reducing that launch cost is a lengthy discussion in and of itself. There are a slew of ideas, everything from making a space elevator to launching rockets off a mountainside track instead of a launch pad to simply making rockets cheaper and more reliable. SpaceX is bringing it down quite a bit all on it's own just by dragging out the old Saturn rocket technology and renovating it, and the space programs of several countries are researching ways to get that cost down further. Personally, I believe the cost could get that low within 10-20 years. Once that happens, someone will shoot for the moon before too long.
