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In order to fix the fuel gauge problem, you will have to change the fuel sending unit. If the car has more than 100,000 miles I would recommend to change the whole fuel pump assembly, which would cost from $60-100 in the part alone which consists of the fuel sending unit, etc. This will definitely help your fuel gauge problem for sure.
This can be as simple as a fuse, please check all your fuses. Next can be a broken wire you will have to get under the car and check the wiring around the fuel tank forward, looking for damaged wiring. Next would be the fuel sending unit in the tank. Here is a picture of what it looks like and a bit of how it works. The fuel sending unit has a lever, that has a float attached to one end, and the other moves a potentiometer. The potentiometer tells the gage to move the fuel needle. If your is not moving the fuel sending unit may be bad or stuck. Picture.>>>>> It is mounted inside the fuel tank and you have to pull the fuel tank out to access.
As long as the car is running fine it's safe to say the fuel pump does not need to be replaced. However the fuel tank sending unit may need to be replaced assuming the fuel gauge itself isn't at fault. First check your owners manual if available for your fuse block info and check fuses then I'd look into the sending unit. Let me know if you need help with that
it may be a fuel pump fault. Cutting out and restarting is a classic sign of a failing fuel pump.
Here in the UK the VOlvo 960 is a 3 litre car (may be a different model to the USA version of the 960) and has 2 fuel pumps. One is situated in the tank and lifts the fuel into the pipeline system. The 2nd fuel pump is located underneath the car alongside the fuel filter underneath the passenger side (UK) and gives the fuel a boost to shove it up to the engine.
To check fuel pressure, find the pipe that goes to the injectors ... there usually is a connector where the metal pipe connects to the flexible rubber pipe. Undo the connector and switch the ignition on ... fuel should spray out at high pressure .. .high pressure .. not small squirts and dribbles.
Fuel pumps are damn expensive. It could also be a sensor at fault - like a crankshaft sensor. The cheapest way to get it sorted is to ask a workshop to identify the fault for you (you can do any work required) - they can check the sensors and electrics on their computer. Changing parts one by one to try and cure a fault can work out damn expensive .... get the fault identified for you first. Its worth the money ..
I think there are still photos of UK Volvo 960 fuel pumps on my website at : http://www.glennsmart.btinternet.co.uk/volvo960.html
Sounds like your fuel gage sending unit has quit working. The fuel tank will need to be removed to gain access to the sending unit. Then you can replace the sending unit and replace the fuel tank to it;s position and your good to go.Good luck.