I'd like to think that it's called "alternative medicine" because it isn't being patented and shoved down the throats of the mainstream. If pharmaceutical companies could wrap their hands around whole plants (thus essential oils), they would have by now. That's why the just reduce their compounds and sell them as drugs.
That said, I absolutely think there's stock in essential oils. They are powerful plant compounds that when absorbed by the skin, pass directly into the bloodstream, bypassing the GI tract which drugs are more often absorbed through. Traces of these compounds can be found in the bloodstream shortly after massage with a carrier oil containing essential oils.
Also, while the physiology of the olfactory apparatus has yet to be completely understood, it is known that certain brain waves are very sensitive to fragrance and the emotional responses to them (which is profound) and that olfactory nerves immediately stimulate the limbic system and hypothalamus. It's also thought that this neurological response has several interactions with the endocrine system, such as triggering the secretion of serotonin and regulating the adrenals.
Again, this isn't information that the old guarde of medicine will teach you, nor is there major funding behind it's research, which is still in independent stages.. but to think that essential oils have ZERO physiological response is, in my opinion, pretty rigid thinking.