What causes degradation of oil in transformers over time?

Transformer oil degrades over time due to a combination of thermal stress, electrical stress, oxidation, and contamination. High operating temperatures accelerate chemical breakdown and oxidation, producing acids and sludge that reduce dielectric strength and heat transfer efficiency. Electrical discharges and arcing generate gases that alter oil composition. Moisture ingress from aging seals or ambient air further degrades insulation properties. Solid insulation aging also releases byproducts into the oil. Without regular testing and treatment, degraded oil can significantly shorten transformer service life.