I've been finding and fixing underground faults for 35ish years. Other than when physical abuse happened such as excavating equipment hits a line or they drive a steel post into it, copper almost never has much problems, aluminum however oxidizes away until there is nothing left. You bad spot on aluminum is usually pretty obvious once you uncover the conductor, will be nothing but aluminum oxide where there once was aluminum.
My best guess is it starts deteriorating at the damaged spot in the insulation, keeps eating away at the conductor lessening the cross section at that area. Essentially making that spot a lot like a fuse link. As you add load it operates a little warmer, which also probably helps speed up oxidation at same time.
Can't say I ever run into situation where there is reduced volts because of resistance though. That "fuse link" still has relatively low resistance just can't carry as much current as the full sized conductor but has little linear length to it so not like reducing a 4/0 to a #10 for several feet, we just talking inches most the time which is no different than placing a fuse link in the circuit. These usually fail with no warning just like a fuse link would when it opens.