I have a 2000 GMC crew cab with the 7.4 litre gas engine recently I had an engine fire and it was fixed by insurance for $7000.00 at the dealership. Then 2 months latter on holiday during spring break the truck losses oil pressure. The engine does not smoke or seize, just losses power. Still full of oil and starts, but there is a rattling noise. GM dealership suggests buying a new engine. Could this problem have been a result of the fire? What could be the cause of the problem and is there any chance of fixing the engine? Where could I get a good used engine and what should the cost be for the engine and installation. The truck is stuck in Medicine Hat and I am in Vancouver. The engine was well looked after and has about 134000 miles.

 

There are only a couple things I can think of that would cause the oil pressure gauge to drop.
1. The oil pump is either cloged or has gone bad. Could be the shaft that goes to the distributer.
2. the oil pressure sending unit has gone bad.
Because you mention a "rattle" that leads me to believe that you have a oil pump problem. If you have not been driving it that way you may be able to save the engine and just fix the oil pump problem. That would be alot cheaper than replacing the entire engine. 134000 miles on that engine is not that bad, I have seen alot more.
Hope this helps!

 

If the engine starts but has no power then would fixing the oil pump help. Is there an electronic shut off when the oil pressure drops?

 

No electronic shut-off for oil pressure as far as I know. If it is losing power while you are driving it with a bad oil pump it is because of heat and friction build up, and the fact that nothing in your engine is getting properly lubed.
There are plenty or reasons that an engine would lose power, from clogged fuel injectors to a bad converter.
Bottom line is that you need to fix the oil pressure issue first. When the mechanic removes your oil pan he is going to be able to inspect the bottom half of your engine, he should be able to identify any bearing damage or cylinder damage. Make sure you use a reputable mechanic.