On-site reliable transformer oil testing to assess the health of an oil-immersed transformer is a great challenge. Different sensors used for the purpose are having several limitations because of the oil and temperature. In this paper, a cross capacitance sensor cell is proposed for field testing of transformer oil which circumvents most of the limitations of thin-film chemical sensors used for the purpose. The cross-capacitance sensor cell based on the Thompson-Lampard theorem has been utilized for the first time to simulate a reliable and accurate sensor to determine degradation in insulating oil. The dielectric constant of the oil, which is determined for different oil samples experimentally, is an essential input for the finite element analysis of the sensor. Finite element analysis of the sensor cell is performed using ANSYS Maxwell software to determine its feasibility as a sensor to estimate the concentration of insulation degradation by-products dissolved in oil. The sensor is simulated to estimate the concentration of moisture and 2-FAL (2- Furfuraldehyde) in oil and to characterize aged oil. Finally, an experimental validation of the simulated sensor response for different fresh insulating oils is done. The experimental results closely match the simulation results. The sensor response is found to be approximately linear and very sensitive. Moreover, unlike thin-film chemical sensors, the same cross capacitance sensor can be used for the detection of different insulation degradation by-products dissolved in oil with proper calibration. Therefore, the proposed cross capacitance sensor cell can be used as a highly reliable on-site insulating oil degradation by-products detector.