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Entropy is maximized for an isolated system (constant energy), free energy is minimized for a system in thermal equilibrium with a heat bath (can exchange energy with the environment). Gibbs free energy is minimized at constant pression and temperature, Helmholtz free energy is minimized at constant volume and temperature.

If you put now the oil/water system into a isolated container the equilibrium state won't change substantially. It remains separated in two phases and that's now the maximum entropy state.