When my baby was discharged, my pedia had a list of products to avoid using on baby and baby oil was one of them, my little one is now one year old and 3 months and up till now, we have not used baby oil, baby powder, cologne and lotions on my son. The only thing we have used so far are organic insect repellents. I would say it didn't have any negative effects when not using them and it saves up budget on toiletries.
Baby oil provides hydration as well as moisturizes your baby's skin. It also keeps them warm during bath time. It must be used sparingly, however, so as not to clog up pores and to inhibit the natural oils their skin produces. I think it's safe to place oil on your child until they're about 6 or 7 years old. But you can choose to place oil even beyond this age. There's no fixed rule, as far as I know. :)
We didn't get used to putting baby oil before bath time. I have tried it less than 5 times I guess when my baby was weeks old but didn't continue doing it anymore. So far, it didn't bring any harm to my kids. I just made sure they don't get soaked in water for a long time to avoid colds or cough.
I know that baby oil or oils in general keeps the skin moisturised and nourishes the skin but have never put oil to the baby before bath time. And she is good and her skin is tender as the baby's skin is.