Larry,
Air/oil separators in rotary screw compressors add pressure drop to the system requiring the compressor to work harder and consume more power. New, clean separators will have only 1-2 psi of initial drop which gradually increases to 8-10 psi as the separator becomes fouled in service (most manufacturers recommend changing at 10 psi). This increased pressure drop definitely carries with it a power penalty. A common "rule of thumb" recognized by the US DOE for any compressed air system pressure drop is 0.5% power penalty for every 1 psi increase in pressure drop. Example: A 200Hp rotary screw compressor that operates 8,000 hrs./yr. with an 8 psi separator delta P will consume an extra $2,095 per year (at $0.05/kwh) over a new (2 psi) separator. This extra energy consumption is small in terms of percentages (and difficult to measure) but does exist and can amount to a lot of money in larger compressed air systems. Standard OEM oil filters are not designed to filter out the ultra-fine solids that are more prone to foul separators. Adding a high efficiency, low micron (1-3)rated bypass filter will remove the smaller solids that shorten the life of separators (and other compressor components).