Why is oil essential in electrical transformers for thermal and dielectric performance?

Oil provides a combined insulation and cooling medium that allows compact, high voltage designs with strong dielectric margins. It fills internal spaces, excludes moisture laden air, and raises breakdown strength between windings and to ground. Thermally, oil absorbs heat from windings and carries it to radiators, preventing hot spots that accelerate paper aging. Stable temperatures and dry insulation reduce partial discharge and arcing risk. Without oil, equivalent high voltage and high MVA transformers would require larger clearances or different insulation systems, often with higher cost or lower performance.