Skyrocketing gas prices are raising demand for more fuel-efficient cars, and rental agencies are scrambling to keep up, according to The News & Observer.

In response, Hertz and Alamo have introduced discounted rates for sport utility vehicles, and Enterprise Rent-A-Car offers free upgrades to SUVs when smaller cars are unavailable, The News & Observer reports.

Kevin Miles, vice president of Thrifty Rent A Car of Ohio, has cut his fleet of SUVs by 75 percent in the past year. Business travelers "may have a reservation for a midsize car, but we may give them a free upgrade to a nice four-by-four SUV," he said. "They'll reject it, because they don't want to pay [for] the gas."

Rental fees have risen in response to higher gas and maintenance costs -- by 5 percent to 10 percent, said Shelton Watts, vice president of Raleigh's Triangle Rent A Car. That's causing more people to choose their rentals carefully, he said. Last summer, the daily rate for a midsize car was $5 cheaper than it is now, according to Abrams Travel, an industry journal.

Still, the car rental market is growing, said AAA Carolinas spokeswoman Sarah Davis. Car rentals are up 3.4 percent compared with the same period last year, but the most interesting part is the breakdown, she said.

"Compact car rentals, like [Toyota] Echoes, are up 7.8 percent, while intermediates, like Corollas, are up 9.6 percent," Davis said. SUV rentals are down 1 percent, she added.