It sounds like there is a problem with the oil pressure sending circuit. The oil pressure sender changes voltage according to the differences in oil pressure. If it is pegged all the way to the max, there may be a short (or open, depending on the way the circuit is designed). I would take it to a shop and have the oil pressure tested with a mechanical gauge first, just to be sure there isn't a problem with the relief valve on the oil pump. But if the oil pressure gauge isn't working properly, you won't know if there really is a problem with the oil pressure, and that could be catastrophic to the engine.
Sounds like you have a bad oil sending unit
Pretty common problem with these. Here's a guide to learn how to fix GM instrument clusters yourself, I used it to fix mine and it worked great.How to guide for Tahoe instrument cluster repair
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