Q. I work for an electric utility and we have big capacitors that have oil in them. What are they for and why are they filled with oil?
A. These compacitors use oil as a dielectric. This is not regular motor, but a synthetic. They are very stable and have a long life. Also, if there is arcing between the plates, the oil merely fills back into the area where the arcing occurred. With solid dielectronics and electrolytic capacitors, this arcing would permanently damage the capacitor. So oil-filled capacitors are considered to be "self-healing".
Capacitors are used in locations such as factories where the load consists of things like motors. The motors have a high inductance, which makes the current lag the voltage.
The capacitors are added to advance the phase of the current to counteract this. If the load current is shifted too much in relation to the voltage, it places an extra burden on the power equipment and makes watthour meters read less than the actual power consumed.