"The O2 sensor allows the ECU to monitor the unburned HC being exhausted by the engine. A high HC output would indicate too much fuel being input and the ECU will lean out the fuel mix."

While that is a good theory, that would require that the car be equipped with a Hydrocarbon monitor rather than an Oxygen sensor. -and the cost difference is several orders of magnitude between them. Since the Oxygen sensor is the cheaper of the two, it means that our fuel injection systems are limited to looking for extra oxygen in the exhaust stream while it's attempting to achieve the perfect 14.7 to 1 ratio of O2 to fuel.

Now, using some rough numbers (not exact but used for this example only), let's say that the cylinder actually uses/burns 96% of the fuel and air in combustion during the power stroke and 4% is dumped to the exhaust unburned. By the time it hits the upper O2 sensor position in the exhaust manifold, let's say an additional 1% is burned, leaving 3% of the air and fuel left. But by the time it reaches the lower position, lets say that it's down to 2% remaining. -and the rest is dealt with by the catalytic converter. Again, this isn't accurate, just an example. There's a lot going on with the exhaust of various concentrations mixing here too.

Could you get some more fuel efficiency by moving the senor upstream to the old position? -Sort of, but assuming that your ECU is mapped to expect accurate data from the lower position, what you're actually doing is leaning out the mixture a bit. Will this hurt your Naturally Aspirated Volvo engine? -probably not much by this small amount, but running too lean is bad in that a lot of extra Oxygen sitting around in the cylinder during combustion will increase the initial flash heat and the O2 molecules are looking for something to bond with at the high temperatures. The only two things left to attack are the Steel cylinder walls (pretty immune) and the Aluminum head and the Aluminum piston. Since the piston has a higher temperature than the head (which has coolant flowing through it), those piston molecules will strip off easier, and you slowly melt through your piston. This is much more of a concern for a Turbo equipped car than a N/A like yours.

In summary, can you move the O2 sensor higher up in your car? -yes, but don't expect it to pay off with better fuel mileage. I have no concerns mounting them up higher here in Michigan where the road salt and rust play havoc with our exhaust systems and all the hardware lasts longer if it's up in the engine bay rather than under the car. If you really want to maximize your fuel efficiency, change out your O2 sensor every 60,000 miles (book spec for the 1986 and later cars), rather than every 100,000 miles that so many of us typically run. Remember, the O2 sensor is a consumable object, it's slowly wearing through it's chemical coatings as it produces that small voltage to send to the ECU. Your AMM is doing about 75% of the work for determining air-to-fuel ratios, but the O2 sensor does the fine tuning to maximize your efficiency.

God bless and have a great day,
Fitz Fitzgerald.