How does insulation oil function inside transformers?

Insulating oil serves two main functions. First, it provides dielectric insulation by filling voids and increasing breakdown strength between energized parts. Second, it removes heat from windings and core and transfers it to radiators or coolers by natural or forced circulation. Oil also helps suppress arcing by quenching small discharges, and it protects cellulose insulation by reducing oxygen contact when the tank is sealed and properly maintained.