Preheat oven to 325 degrees. In a medium pot, bring water to boil. Add oil and macaroni. Cook for 5 to 8 minutes, or until macaroni swells and softens. Drain.
Meanwhile, melt butter in a saucepan over medium-low heat. When melted, stir in flour. Cook for 3 to 4 minutes, stirring, until roux is browned. Slowly add milk, whisking vigorously. Next, add 2 cups american cheese and stir until melted. Whisk in Parmesan, black pepper, and mustard. Season to taste with salt.
Add macaroni to a small casserole dish. Stir in cheese sauce, then scatter remaining ½ cup American cheese over top. Lightly sprinkle with paprika and bake for 30 minutes, or until cheese bubbles around edges.