Qsilver2: What year is your E38? Do you have the liquid cooled alternator? Does the positive cable comes together with the oil line? Do you have the nut that is holding the alternator cable covered by a plastic shield?
I think you had more than the oil spill over there. Maybe you had a dust/oil/moisture deposit there which made possible the short. This could also happen to the positive "junction" connection under the engine frame (pass side). There's attached to it.
JOY = BMW