If it is surging rather quickly, sounds like the governor is doing what they call, "hunting". Past experience has taught me it can be lack of fuel, and the governor will respond by opening the throttle to recoup lost RPM's, or there is wear in the Gov. assembly.
The thrust bearing inside the gov., that actuates the cross shaft is notorious for going bad over a long period of time. The cage that holds the small ball bearings, will let the little ball bearings drop out, and you will have slop between the actuator, and cross shaft, and may cause something like this. I know when they completely come apart, the engine will not go above approx. 1/3 throttle.
Check for slack in your gov. control rod by unhooking from the carb. There's probably a little, but not supposed to be much. Be careful of the little arm on the carb side. They used to be potmetal, and easily break. A spring in the gov. housing is supposed to hold it within tolerence. There is a small adjusting bolt on top of the Gov. housing, to adjust the Gov., to keep from "hunting". I believe even an I&T manual shows the adjustment procedure.
It' not hard to check the bearing condition. Just pull the front cover off the Gov. assy., and you're looking at it. It rides on a shaft, behind the two fingers on the cross shaft. You used to be able to buy that little bearing for 75 cents years back. Last I bought was around $8.00 if memory serves me right. Also check the condition of the control spring. If it is worn in the hooks, replace it. If if breaks, it will allow the engine to run away.
I've attached an exploded view of the Gov. assy. from Case/IH to give you an idea of what you will be looking at.
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