Sounds like the thermostat needs replacing.  I just
replaced mine... the guage was reading low (like not
above the bottom thick stripe) and mileage suffered.
New thermostat and o-ring (a real trick without
removing oil filter) and gauge reads steady just above
led, fan works above that.  More heat, better mileage.

Just drove from Olympia to Portland and back again
averaging 22mpg over 270 miles, one tank.

The local specialty vw shop tech said the thermostats
go bad if they get overheated, so I blame the
P.O.(previous owner).

Hope this helps,
Gregory Smith
'84 Vanagon
Olympia, WA

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