That can also be a distributor seal leak. It can run down the back of the engine and show up there. Also check the front seals, if both they and the rear are leaky, the trap may very well be the root cause. However, I think your overall usage problem is more indicative of piston rings. Have someone follow you down the road. Once your car is warmed up, stomp on the gas and have your tail observe the tailpipe emissions. The aerodynamics of Volvos are such that smoky exhaust is difficult to see from the driver's seat since it stays so low to the road. You really need a tail to watch for smoke and color.
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Bob Kraushaar '94 945T, '88 240, '84 242Ti, '94 F-150, '88 300 TE, '89 560 SL, '68 Shelby GT-500 KR
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