It's also a crucial part of the skill leveling system. The Protagonist can level up his skills when using it by converting hallucinogens to essence. The amount of extracted essence is directly influenced by the oven efficiency: an oven efficiency of 4 means that the player will extract four times more essence from hallucinogens.
The oven in Hideout 1 is already lit from the start, but ovens in later hideouts have to be lit manually. Ovens don't require items to be lit and don't have to be fueled.
Using the oven will save the player's game.