Question

How oil in transformer helps in insulation

Answer 1

Oil is a great heat transfer medium for an electrical transformer.

Transformers generate a lot of heat in dropping high voltage to low voltage. The heat has to be removed or the copper will melt and electrical contact will be lost.

In comes oil. Oil has a very good heat transfer coefficient (removes heat easily), does not conduct electricity at all (so electrical shorts won’t occur), and is selected to have a high boiling point, so it remains a liquid inside the transformer. It is also very chemically stable, so there is no breakdown over time
In this way,oil act as a in