Transformer oil or insulating oil is usually a highly-refined

Refining

Refining is the process of purification of a substance or a form. The term is usually used of a natural resource that is almost in a usable form, but which is more useful in its pure form. For instance, most types of natural petroleum will burn straight from the ground, but it will burn poorly...

 mineral oil

Mineral oil

A mineral oil is any of various colorless, odorless, light mixtures of alkanes in the C15 to C40 range from a non-vegetable source, particularly a distillate of petroleum....

 that is stable at high temperatures and has excellent electrical insulating properties. It is used in oil-filled transformer

Transformer

A transformer is a device that transfers electrical energy from one circuit to another through inductively coupled conductors—the transformer's coils. A varying current in the first or primary winding creates a varying magnetic flux in the transformer's core and thus a varying magnetic field...

s, some types of high voltage

High voltage

The term high voltage characterizes electrical circuits in which the voltage used is the cause of particular safety concerns and insulation requirements...

 capacitor

Capacitor

A capacitor is a passive two-terminal electrical component used to store energy in an electric field. The forms of practical capacitors vary widely, but all contain at least two electrical conductors separated by a dielectric ; for example, one common construction consists of metal foils separated...

s, fluorescent lamp ballasts, and some types of high voltage switch

Switch

In electronics, a switch is an electrical component that can break an electrical circuit, interrupting the current or diverting it from one conductor to another....

es and circuit breaker

Circuit breaker

A circuit breaker is an automatically operated electrical switch designed to protect an electrical circuit from damage caused by overload or short circuit. Its basic function is to detect a fault condition and, by interrupting continuity, to immediately discontinue electrical flow...

s. Its functions are to insulate

Electrical insulation

thumb|250px|[[Coaxial Cable]] with dielectric insulator supporting a central coreThis article refers to electrical insulation. For insulation of heat, see Thermal insulation...

, suppress corona

Corona discharge

In electricity, a corona discharge is an electrical discharge brought on by the ionization of a fluid surrounding a conductor that is electrically energized...

 and arcing, and to serve as a coolant

Coolant

A coolant is a fluid which flows through a device to prevent its overheating, transferring the heat produced by the device to other devices that use or dissipate it. An ideal coolant has high thermal capacity, low viscosity, is low-cost, non-toxic, and chemically inert, neither causing nor...

.
The oil helps cool the transformer.