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That is specifically talking about use on the skin and the possibility of sensitisation that occurs when some of the chemical componants oxidise.
And on this we will have to agree to disagree. What the above and the whole paper are suggesting is that the oxidisation is caused by the additional components of cosmetic ingredients. Many of the experiments quoted are animals and are inconclusive against humans.
These guys http://www.rcpath.org/index.asp?PageID=798 suggest it for skincare against mrsa, as do others.
I would also like to point out that the EU's suggestion of 1% is due to the lack of research of tea tree in cosmetics and its variants as well. Therefore, my vote of choice for understanding essential oils would be Tisserland and Balacs. The french know their stuff about oils - its where it all started and essential oils are actually prescribed there by docs for health.:)
There is a huge difference between oils for beauty and oils for home, and I do believe that it is a huge plus for you that you are so careful with your cosmetics. You are someone I would trust.