Oil is used in transformers for two main reasons: **cooling** and **insulation**.
1. **Cooling**: When electrical current flows through the transformer, it generates heat. The oil helps to absorb this heat and carry it away from the transformer windings and core. The oil circulates inside the transformer to maintain an even temperature and prevent overheating, which could damage the transformer.
2. **Insulation**: The oil also acts as an insulator. It prevents electrical arcing or short circuits by providing a barrier between the high-voltage parts (like the windings) and other components. This helps protect the transformer from electrical faults and ensures safe operation.
The oil used is usually **mineral oil** or **synthetic oil**, and it is treated to resist breakdown under high temperatures and voltages.