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Has anyone heard of or used lighter fluid?<<<
Sure, it's mostly kerosene and we used to call it Liquid Wrench back in the day! It was pretty common to use gasoline for various jobs around the farm back when I was a kid as well. No doubt I'll come down with cancer any day now...
At any rate, as with most thin petroleum fuels it's going to have lubricity as well as a very good solvent action but most of them don't bind with/displace water worth a damn. Also, since they're highly volatile they tend to evaporate off and leave behind a gummy residue that I don't think is desirable on firearms.
If it was a great item to use you can bet many folks would be doing so.
Cheers,
Oly