Took the 2000 Volvo v70 xc wagon out of storage to drive around town in.
Things started off fine for most of the day, nearly put 300 miles on the car doing errands.

Then in the evening running to go see my youngest play soccer on the way down to him the oil light goes on the dash. I get into town and check the oil level. Seems okay, but I figured I better have some oil on hand. Recheck and top off. Start the car up the oil light goes out as I'm traveling 5 miles down the road up a hill the oil light comes on again. I get to the nearest place to stop and check the level, the level seems fine. I start the car again the oil light is out. I get near the place for my sons soccer game and the light goes on.
Okay at this point I figure I wouldn't be back in the car for an hour or so. So, I figure to let everything cool down. Hour and half later I check the engine compartment and can't find any oil leaks. I check the oil level and it was maybe a quarter quart low. So I top off. This time though I start the car and the light stays on. I crawl home with the car like this and try to avoid any hills that I can so I put no pressure on the engine. I get home and the car limps up the last hill at about 15 miles an hour, park the car and let it sit for a day or two. Then I go out on a weekend morning and check the oil level. It states that I'm about 2 quarts more than I should be now.

Any ideas as to what is causing the oil light issue, poor oil level reading, and the lack of power? Please advise. Thanks.

Low oil pressure - bad o-ring on the pump pick up.
Too much oil - slow drain down on 5 cylinder engine.
Low power - driving with oil pressure light on.

Greg

Hopefully next week I can jack the front of the car up and put in on stands. Then I'm going to drain out all of the oil in the car for as long as it takes. Then I will put in 1 less quart than is required along with my engine flush product and let run for 20 minutes. Then I will drain out completely again. Out fit with a new oil filter and new oil and see what happens from there.

Bob, is this the piece of junk you said wasn't any good??? :>)

You over filled it, drain out about 2 quarts before you run the engine again. The oil light could be bad O rings in the oil pickup - not a fun job as the oil pan needs to come off.

Changing the oil won't do any good, but a new filter might. You loose 1 quart of oil with just a filter change. You are using a Mann filter, right?

My piece of junk takes about 2 hours for the oil to return to the sump, a real dirty engine that is slowly cleaning itself up. So, checking the level after 1 minute will show the level down about 1/2 quart. The next morning will show full.

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Keeping it running is better than buying new

I jacked the front of the car up today. Drained out the oil completely. The car had a total sitting in it of 8.5 qts.
I put 5 quarts in, then added my engine flush product and started the car up. The car ran perfectly fine for about 10 minutes, during this time no oil light either. Then shortly after that I heard a noise on the belt side of the motor then saw white smoke coming from the belt area and the oil light was on. Shutoff the car and looked underneath, saw oil leaking from the turbo unit itself and the lower area around where water pump is. I then took the cover off to the belt area, but that was dry.

Not sure what the deal is now.

hmmm.

How old is the water pump? That could be the source of the noise and the white smoke. Wipe a clean paper towel under the pump area and see if it is antifreeze.

The turbo oil drain gasket could be leaking.

The oil pressure is normally high when the engine is cold. As the oil warms up the pressure drops naturally. If there is a blockage in the oil pick up tube, or a bad O ring, all you can do is drop the oil pan.

Did you swap the oil filter? I have heard of defective filters that can make noise and restrict flow.
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Keeping it running is better than buying new

I guess I'll have to drop the pan on the car. What else should I look at while pan is down? Are there a bunch of gaskets/seals to replace once down?

Let me know.

There is just an O ring kit. You will have to check the screen on the oil pick up tube and clean off any garbage. Dropping the pan is a real pain and getting the liquid seal on the clean surface is hard with the oil constantly dripping. There are a few writups on the WWW. I like using zip ties to keep the PS lines out of the way.

Watch out for the pan bolts, they are different lengths.
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Keeping it running is better than buying new

I don't think I'll have to worry much about dripping oil as I was going to just jack the car up and open the drain plug up and let it be for a day or so. The car has not been driven or run for almost two weeks now.

Weird one...

The oil light came on in both my 850's after they sat for awhile. After driving for a short time it went out. Think that is pretty common. Not sure what is going on with your car.

As Greg suggested, it might be that the #5 cylinder is very slow to drain.