Is oil in transformer use for lubrication?

Answer 1

Transformer oil is for cooling.

Transformer oil has heat conductive properties, along with its insulating properties, that take the heat build up from the windings to the outer case of the transformer. The transformer tank is used as a heat sink to allow the outside ambient temperature to cool it down. On big kVA Transformers there are heat tubes on the outside of the tank. On even bigger transformers there are fins that the oil travels through. This provides a bigger surface area to dissipate the heat. The tubes and fins also allow thermal siphon of the oil through the tubes by drawing in the cooler oil at the bottom of the tank and moving it to the top of the tank where the hotter oil is. This circulation greatly increases the cooling ability of the oil to keep the transformer with in its allowable temperature rate of rise zone.

Additional Answer

The second function of transformer oil is insulation. Oil has a far greater dielectric strength than air, so it enables internal components at different potentials to be located far closer together -thus significantly reducing the 'footprint' of a transformer.