So looks like oil is coming into the intake thru the hose that connects to the oil cap. Why is this happening? See the pic.

Thanks peeps.

 

That's the Vent hose for the PCV(positive crankcase ventilation) system, no its not the "pollution control valve" :)

Your PCV Valve probably needs to be replaced and its hose and the vent hose needs to be cleaned

All engines have Blow-By, when a cylinder fires some of the HOT gases "blow-by" the piston and rings and into the crankcase, these hot gases vaporize some of the oil coating the pistons, rings and cylinder walls, that's were the oil vapor in an engine comes from, not from bearings or valve train they just drip oil, if a bearing or rocker got hot enough to vaporize oil the engine would be beyond toast, lol, it would be pure carbon on its way to Diamond status

This blow-by pressure and oil vapor has to go somewhere, in the old days there was a tube on upper oil pan or lower block pointed down at the ground and blow-by pressure and vapor exited out and oil drip from this tube constantly when engine was running, the good ol' days, lol.

So PCV system was added, it used engine vacuum to suck blow-by pressure and oil vapor from crankcase up to valve covers, this allowed gases to cool and most of the oil vapor condensed as it made the trip to the top of the engine.
The Vent hose allows fresh air to be pulled into the valve covers and crankcase which also aids condensation of oil vapor, cooler air.

If PCV valve is clogged or not working the the blow-by pressure and oil vapor has to go somewhere, and that's the Vent hose

Basic diagram of PCV system air flow: http://67-72chevytrucks.com/vboard/a...1&d=1278786385
Air cleaner filler cap is vent hose
PCV valve on opposite valve cover sucks air into intake, where any remaining oil vapor would be burned in the cylinders

PCV valve opens and closes by engine vacuum levels, the PCV Valve closes with higher vacuum, opens with lower vacuum, so opposite of what you might think
Thats because the lower the vacuum, i.e. accelerating, the higher the blow-by, so PCV Valve needs to open MORE when vacuum is low, so there is a WEIGHTED valve inside, higher vacuum pulls weighted valve up closing it, lower vacuum allows weight to drop opening valve more.
If you shake a PCV valve you will hear the weighted valve rattle inside, and NO..........that does NOT means it is good, lol, old mechanics tale, it means its not stuck, but doesn't mean it is good.

As an engine gets up in the miles the rings get worn and Blow-by increases, this is also normal although not desirable, lol
Worn rings also lowers compression so lower power, high blow-by could also cause your Vent hose issue, PCV valve just can't keep up, but you can get different PCV valves until its time to rebuild