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A detailed thermodynamic analysis was performed to demonstrate the fundamental efficiency advantage of an opposed-piston two-stroke engine over a standard four-stroke engine. Three engine configurations were considered: a baseline six-cylinder four-stroke engine, a hypothetical three-cylinder opposed-piston four-stroke engine, and a three-cylinder opposed-piston two-stroke engine. The bore and stroke per piston were held constant for all engine configurations to minimize any potential differences in friction. The closed-cycle performance of the engine configurations were compared using a custom analysis tool that allowed the sources of thermal efficiency differences to be identified and quantified.