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Can carmakers adjust to rapidly rising fuel costs?

Toyota Prius hybrid model cars at a Toyota dealer in Hollywood, Calif.

TEXT OF STORY

STEVE CHIOTAKIS: And with all the chaos in Libya this week, the price of oil has surged. Which is raising concerns about rapidly rising gas prices. Whether the fragile economy can handle the added strain. And whether carmakers have made fuel efficiency adjustments since the last time gas was so high.

Michelle Krebs is a senior analyst at Edmunds.com, and she's with us from Detroit. Good morning.

MICHELLE KREBS: Good morning

CHIOTAKIS: Are the car companies ready to deal with higher gas prices do you think?

KREBS: Well they say they are, and certainly we can say that they are in far better shape than when we had the 2008 gas price spike that just really hurt the industry and was the start of the recession.

CHIOTAKIS: Are you telling us that they learned something then from the last price hike?

KREBS: Well I don't know that they learned something because those vehicles were already in the works. What is happening is the federal government has a mandate of higher fuel economy that goes into effect for 2016, so they are building vehicles that get better fuel economy.

CHIOTAKIS: If we see these sustained oil prices and higher gas prices throughout this year and going forward, what does that do for the recovery?

KREBS: When gas prices sore, people get very nervous about any kind of purchase. And they don't buy anything. And this economy is extremely fragile. Auto sales are only growing in small increments and so it could shut off that recovery. I think that's the bigger issue for the economy and for the auto industry rather than what people will buy.

CHIOTAKIS: Michelle Krebs from Edmunds.com. Michelle thanks.

KREBS: Thank you.

About the author

Steve Chiotakis was the host of Marketplace Morning Report until January 2012.

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