An innovative oil observer for estimating oil concentration and oil amount in a refrigerant compressor in a vapor compression cycle is described. The invention ensures the safe operation of the compressor by ensuring that adequate lubricant is present in the compressor. This oil observer is based on oil models for components of air conditioning and refrigeration systems. Oil models for HVAC components estimate oil mass and refrigerant mass in each component. With all component oil models and heat exchanger observers which provide the estimation of inner geometric lengths of two-phase flow heat exchangers, a system-level oil observer is established by integrating all component models. Experimental testing has been conducted to verify the performance of this oil observer for steady state operation and dynamic processes. The invention has direct applications in residential and commercial air conditioning and refrigeration systems.