Transformer oil or insulating oil is usually a highly-refined mineral oil that is stable at high temperatures and has excellent electrical insulating properties. It is used in oil-filled transformers, some types of high voltage capacitors, fluorescent lamp ballasts, and some types of high voltage switches and circuit breakers. Its functions are to insulate, suppress corona and arcing, and to serve as a coolant.
Resource from: wikipedia http://en.wikipedia.org/wiki/Transformer_oil
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