Novel nano-sized rare earth metal oxide prepared from aqueous reverse micelles is provided. The engineered nanoparticles have large surface area to volume ratios, and sufficient oxygen vacancies on the surface of each particle, so that when mixed with carbon-containing combustible fuels, the particles remain suspended indefinitely; there is a significant reduction in soot and other by-products of combustion, an increase in engine efficiency and less fuel consumed per mile traveled in various vehicles, such as, but not limited to, automobiles, defense vehicles, airplanes, ships and other surface or air-bearing vehicles.