No oil means that there is no oil for sealing the rotors and for cooling the compressed air, elements and rotors. ... The element is cooled by cooling water that flows through special pockets in the element casing.
The general mechanism of an air compressor is a piston or rotary element (e.g. rotary screw or vane) that draws in air, which is compressed into a storage tank. Naturally, since the piston or rotary element needs to move consistently and smoothly for this to work, it generally needs to be lubricated.
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