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The chances are pretty good that your oil pressure sensor has shorted itself out. This happes a lot to C5s with some miles. The fix is a new sensor... the sensor is located under your intake manifold.
Do a search for Oil Pressure Sensor DIY and you will find several threads about how to change it out yourself.
My local dealer quoted me $650 (Bob Stall Chevrolet) to make this repair back in May of 2005. The part itself is $40 to $70 (depending on where yu shop) and takes about one to two hours to replace depending on your tools and experience.
Same thing happened to me today except mine pegged at 130. Under the intake, really? Sound GM engineering. I did a search on oil pressure to get this thread. I will look furhter.
It's not really UNDER the intake perse but it's behind it. They say you can get to it and replace it if you've got skinny hands but I wouldnt try it. I'd just pop the intake off. Would be a good time to upgrade to an LS6 or FAST intake while you're at it in prep for a nice healthy cam down the road.
Yup, its your oil pressure sensor. Easy to swap out, a first-timer would take roughly 2 hours to get the whole job done. Check out ls1howto.com and print out the "Intake manifold Swap" procedure.
i posted a thread the other day on this when i joined the bad sensor club. Ive also heard it may just be the connections with the sensor. I'll be getting in there soon to check it out.
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