I have used EO's in my lip balms with great success. My friends love them.
The rules I was taught were to never use more than 1% EO and make sure that the EOs aren't irritating or phototoxic.
I bought a non-phototoxic EO for my citrus flavoured one tho. That's really important. A lip balm is for shielding lips, not making them worse. For a lemon flavour I used lemon myrtle to avoid the phototoxic problem. There's plenty of lemon flavours that aren't actually lemon, which is handy. I made a cinnamon and vanilla also, but used only 0.5% EO as the flavours are strong and don't require any more. I like to keep the spice EOs lower because they could be irritating.