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0.) Did the person tell you exactly which code was stored in your car's computer? Any one of several COULD be caused by a bad O2 sensor
1.) Serious enough to fix sooner rather than later (but not today). The O2
sensors (there are two of them) are used in tandem to adjust the richness of the gas mixture. A too rich or too lean mixture will eventually cause damage to the engine or catalytic converter. Eventually is the relative term here, dependent upon the severity of the problem.
2.) If it is one of the O2 sensors, I believe the retail price is about $200 for each, plus 30 minutes labor (for each???).
3.) The light can be reset at the Autozone if they will do it. Otherwise, someone with a scan tool can reset it; I believe it will also go out by itself after the item is fixed and after a certain of drive cycles. (I'm not sure about this, since I have usually reset mine with a scan tool after fixing the problem. Anyone else?)
Before you go buying one or two oxygen sensors, make certain that is your problem. If you are mechanically inclined, there are further tests you can and should do yourself, some which need a scantool. (You really should buy a scan tool if you are planning to do anything more than changing the oil yourself.)
If you are not so inclined, I would bring it to a Volvo mechanic.
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