All that is happening is the scented oils in the orange peel are dissolving in the alcohol. The longer you leave it in, the more will dissolve--to a point. The oils will start dissolving relatively quickly, but after a time, the process slows down as most of the oil moves out of the peel and into the alcohol. An equilibrium is reached and you won't get any more out of the orange peel, even if you leave it longer. You may get more out if you grind up the orange peel into smaller pieces, but then you might get other unwanted smells. There is no chemical reaction going on. It's just dissolving, like when you make tea, and the tea in the tea bag dissolves in hot water. There is no "gas" really. It is just the scented oils in the orange peel that evaporate naturally into the air. That is: orange oil molecules turn from liquid phase into gas phase, just from the heat of the air in the room, then your nose picks up these molecules floating around in the air and you smell them. There is no chemical reaction going on here either. It's just plain ordinary evaporation.
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