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"I recently read that a laser pointer can be useful for identifying suspended solids and oil/water emulsions in sight glasses. How does this work?"
One of the things you are looking for is reflective light fragments indicating large solid particles suspended in the oil. You can observe this by experimenting with a new turbine oil or other rather clear oil in a sample bottle.
With the laser passing horizontally through the oil, sprinkle table salt into the open mouth of the bottle. You will see something of a laser light show as the salt falls through the light beam. Without the use of the laser, the salt in the oil is completely invisible to the eye.
Another practice is to observe the laser light beam on a white piece of paper after it passes through the oil. Is the laser spot clear and distinct or is it blurred and diffused? Diffused light may indicate emulsions, oxides, color bodies, other contaminants or oil degradation products.
The laser does not work with dark or opaque oils.