Be careful with this stuff! Scotch bonnets are one of the hottest natural peppers out there!
Combine the oil, peppers, garlic, onion, and salt in a big sauce pan on medium-high heat. Cook that stuff for 5 minutes, stirring frequently.
Pour the water in and continue cooking for another 20 minutes, or until the ingredients turn soft. Make sure to keep stirring! Take the pan off the heat and let the mix cool to room temperature.
Pour the mix into a blender, and puree until smooth. Pour in the vinegar and sugar and blend until the whole thing's mixed. Keep the sauce refrigerated until you want to use it.
If you want this stuff to really burn, leave the seeds in the peppers.