The system should prevent the motor from starting when the oil is low, other wise it is pointless because the dummy that can't remember to pull the dip stick won't look at a readout either. The dielectric constant of oil is about 2.2, I believe so an oscillator could vary nearly 2:1 between full and empty. A frequency discriminator could switch the motor off.
The plates of the capacitor cannot be too close together or surface tension will keep the oil between the plates. The formula for capacitance of parallel plates is: C = 0.225*Dr((n-1)*A/t) where
Dr = dielectric constant = 1 or air
n = number of plates
A = area of plate in square inches
t = thickness of dielectric (plate spacing)
C = picofarads
For a two plate capacitor, plate 1/2" X 1", spacing 1/8", the capacitance is about 2pF in oil, 1pF in air. Those values will be difficult to work with.