Did I just almost start an oil fire?

When you lift the lid on something that's been fryed in hot oil while the oil's still hot, any water that's cooked out of the oil and condensed on the lid has a chance to fall back into the oil. That can cause violent spattering. Usually being gentle in lifting is enough to prevent the problem.

Although oil can spontaneously combust if heated hot enough, the typical reason for grease fires is the following combination of events:

• the oil level is too high in the vessel
• wet ingredients cause the oil to violently bubble
• the bubbles go over the side of the vessel
• the spilled oil ignites from the burner below

... and when it happens, it's really not good. (trust me, I speak from experience). And the 'cover with a lid to keep out the air' trick doesn't work if your stove is designed in such a way as that there's venting from underneath the burner. See How do you put out a grease fire? .

Note I answered this question assuming that the onions are in the oven, not on the stove. See the other answers for a frying pan on top of the stove.

It is highly unlikely that you started an oil fire in the oven. The flash point of oil is close to 400 Celsius, domestic ovens don't go that high. And even if you had managed to heat the oven to 300 Celsius, this wouldn't be the temperature of the oil in the pan. Without having been there, I can't tell for sure, but I don't see how you can have gotten it hot enough. Besides, oil burns with visible flames, if it doesn't give you an outright flameball.

A better explanation for the cracking would be steam explosions. They are unavoidable and harmless. The sugar would explain the smoke, sugar chars at 190 Celsius.

If lifting a cover to check you should lift it away from you. Since the cover has water dropplets on it and they will splatter when hitting the hot water. The cover will help in keeping most of it off of you. Illiminating the possibility for burns on your body.

I would say you nearly started a batter fire.

A scary phenomenon of spontaneous combustion, that not many people I know have heard of, unless that happen to work in a chippy.

Fried scraps will spontaneously combust. I have personally seen this occur, but am not sure of the exact process. Guessing I would say that as the bits dry out air and thus oxygen gets to a finely divided surface (bubbles of batter) and it ignites, possibly due to the batter or surroundings retaining heat. I was taught to always pour a bucket of water in to the outside waste bins of chip shop cooked batter waste to prevent this occurring.

An example reported a couple of years ago apparently in a batter bin inside the chippy

'Batter bin' caused fire at chip shop, says owner

As reported in DevonLive Chip Shop owner Lee Grayling saying:

... fire started in what is known as a batter bin, where excess pieces of fish batter are discarded. ... ... "I have heard of this happening in other chip shops - apparently the batter can generate heat. ... From DevonLive

Another reference: By Thornhill Insurance

Fire Prevention in Fast Food Establishments

Waste

Bits or Scraps (depending on where you are from!) can be a huge risk to Fish and Chip Shops and Fast Food Establishments and are often overlooked. We personally have seen numerous instances where the waste was left in the shop after closing time and these have spontaneously combusted, leaving the whole shop ravaged.

Waste should always be stored as far away from your property [sic] ideally in a metal bin and this is usually another insurance warranty.