Why is oil coming out the dipstick?

Answer 1

Usually it is because there is too much crankcase pressure. The pressure can't be relieved through it's normal avenues, so it pushes itself out of the dipstick tube. The PCV valve could be bad. Don't know what motor you have, but some have additional breathers on the valve cover that could be clogged.

A worse case scenario is if you have bad rings and that is causing pressure to escape past them and into the oil pan. From the oil pan it goes out the dipstick.

A clogged catalytic converter is another possibility. The core of a catalytic converter can sometimes break loose and bang around inside the metal housing and sometimes lodge against the output of it, blocking the gas from exiting like if you had shoved a potato up a tailpipe. This causes extreme extra pressure in the cylinders which blows by rings and pressurizes the crankcase. The first time I ran into this the smog hoses would literally blow off the engine (not a Saab) and the engine would have no power to rev above 2k rpm. A shop said the engine was shot. I replaced the engine, and had the same trouble within a half mile. (The shop that did the diagnostic ended up giving me a lot of money about this.)

Easiest backyard mechanic way to test the converter: With car off, crawl under and rap the cat a few times with a rubber mallet. If the core has broken loose you will hear it rattling around. Another way, loosen your exhaust pipe where it attaches to your exhaust manifold, see if the lack of power suddenly disappears. (Caution, real noisy and bad for engine and atmosphere, just try for a block or so.) That's because you have given the exhaust gases a way out even if the cat is clogged.