Because it allows the [Maillard reaction](https://i0.wp.com/www.compoundchem.com/wp-content/uploads/2015/01/Food-Chemistry-Maillard-Reaction.png?ssl=1) to take place. This chemical reaction is responsible for the browning of fried foods, and it creates the delicious roasted and toasted flavours of fried foods.
The key is that this reaction takes place at 140-165 C, which is hotter than the boiling point of water. No matter how hot the pan gets, liquid water itself can’t get hotter than 100C unless it’s in a sealed vessel. The extra heat goes into turning water to steam faster, but the liquid water can’t get hotter than 100C. But oil remains a liquid in this temperature range! That means the oil in the pan or fryer can get hot enough to cause the Maillard reaction in the food, creating the good flavours.
**TLDR:** You’re right the oil doesn’t taste good on its own – the point of the oil is a means of getting the food hot enough to do the chemical reactions that make the good flavours. The flavor isn’t oil itself.
More info:
[https://en.wikipedia.org/wiki/Maillard_reaction](https://en.wikipedia.org/wiki/Maillard_reaction)
https://www.seriouseats.com/what-is-maillard-reaction-cooking-science
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