What causes the fuel gauge to occilate up and down while driving?

Not sure why it is doing that but am guessing the sensor is flaking out.

 

I'm guessing you're guess is probably the correct guess, but it's called a fuel sending unit, not a sensor.

 

driving on unusual terrain...

 

I will say you have wires rubbed that make contact now and then.

They are not shorting just causing the needle to bounce

Sending units tend not to fail quite like that but it is also possible

 

Going up or down a hill or turning sharply will cause it to vary because the fuel level by the sender float will change. The cluster gauge is also dependent on the voltage because it uses solenoids (electric magnets) to set the needle position, so if your alternator is varying the voltage a lot it might affect it, or if you are pulling a lot of current on the same wires that lead to the cluster. A bad or weak ground might affect it too.

 

OP, how much variance are we talking about here? As @DrZ said, it will fluctuate on hills and turns. Mine can vary about as wide as the needle is, so not much.

 

When im more than half full my needle will fluctuate from full to empty. But after it gets closer to half tank or 1/4 tank the needle will read accurate up until im out of gas. Curious if my sending unit is bad.

 

My truck does something similar