Topic on Talk:SpongeBob SquarePants
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One web page says:
Most ovens are not flammable, so unless they were really ancient, most ovens would not have caught fire like Squidward's did. [...] it is highly unlikely that it would have been able to set fire to the entirety of Squidward's house that quickly.
But, they made the oven extra-flammable so that it would work underwater; that is why it sets fire to his house that quickly.