History Of Racing Fuels
Methanol
At its inception, the IRL used methanol racing fuel, which had been the de facto standard in American open wheel racing since the 1964 Indianapolis 500 Eddie Sachs - Dave MacDonald crash. Methanol had long provided a safer alternative to gasoline. It had a higher flash point, was easily extinguishable with water, and burned invisible. With the IRL's introduction of night races in 1997, the burning of methanol fuel was visible for the first time, seen with a light blue haze. With this in mind, in an effort to make it more visible in case of fire during daylight hours, additional mixtures were placed in the fuel. As a safety feature, the methanol would burn with a color.
Ethanol
In 2005, driver Paul Dana brought the sponsorship of the Ethanol Promotion and Information Council (EPIC) to his IndyCar team. EPIC is a consortium of ethanol producers that advocate the increased use of ethanol. EPIC were anxious to address public concerns of that era that ethanol use led to engine damage and poor performance when used in street cars. As a marketing effort, it was believed that sponsoring an IndyCar could be used as a tool to promote education and awareness of ethanol use, and to curb the spread of erroneous information.
Dana was killed in a crash in 2006, but the IRL had already begun a transition to ethanol fuel. For the 2006 season the fuel was a 90%/10% mixture of methanol and ethanol. Starting in 2007, the league advertised "100% Fuel Grade Ethanol," the first competitive series to utilize renewable fuel. The mixture was actually of 98% ethanol and 2% gasoline, provided by Lifeline Foods of Saint Joseph, Missouri. The additives satisfies the U.S. government's demand that the alcohol be unfit for human consumption, and adds visible color in case of fire.
To compensate for the loss of power due to the use of ethanol, the displacement was increased back to 3.5L. Since ethanol gets better fuel mileage than methanol, the fuel tanks in the car were decreased.
Compared to methanol, human contact with the current ICS fuel is much less harsh, and the fumes much less irritating. The fumes are often compared with the sweet smell of apple cider or apple cobbler. Unlike methanol, ethanol is not caustic and does not cause chemical burns when it comes in contact with the skin. It also is less polluting when spilled compared to methanol.
From https://en.wikipedia.org/wiki/IndyCar_Series#Fuel