All systems with moving parts need some sort of lubrication and I do lubricate my fly reels. The most important thing to remember, in my opinion, is not to over lubricate a fly reel. Too much oil or grease will attract dust, sand, etc. I only use Quantum Hot Sauce reel oil and Quantum Hot Sauce reel grease on my reels. Remember that a drop of oil goes a long way and just grease the teeth on gears and do not apply in excess. I do not lube the drag system, just the spindle and gears. These are the moving parts that get the most use.

The above are just what I do and my opinions.