With vehicles becoming more and more reliant on sensors and electronics to run right, the stakes are rising that if one of the sensors fails, you may see a huge drop in fuel economy.
One of the most important sensors on a vehicle is the oxygen sensor. Every car built after 1980 has one or even more oxygen sensors. One of the main reasons oxygen sensors were installed was to cut back on emissions. The ultimate reason for the oxygen sensor is to cut emissions and help the vehicle run as efficiently as possible.
A car burns gasoline along with oxygen from the air to create an explosion. The oxygen sensor ultimately measures the oxygen content of the exhaust and determines if more or less fuel is needed to make the car run correctly. The perfect ratio as many car enthusiasts know is 14.7:1 (different fuels, different ratios- E85 has a different ratio). This is the perfect balance. Too much oxygen will make the ratio higher, and cause the car to run "lean", without enough gasoline. Running to little oxygen will make the ratio lower, or cause the car to run "rich"- which results in lower fuel economy and higher emissions.
This is where the oxygen sensor comes in. It constantly monitors the exhaust and takes measurements of the oxygen content and helps the engine computer determine when more or less gasoline is needed. The problem is that if your vehicle has one sensor and it dies, your car no longer knows exactly how much gasoline is needed. While the vehicle will still run, it will use pre-programmed computer maps to determine how much fuel to use, which typically use much more fuel to make sure the engine doesn't suffer failure from not enough fuel. This not only results in much higher emissions, but much lower fuel economy. When the vehicle is in this "limp" mode, it can consume as much as 25% more fuel.
Thus, the oxygen sensor (along with other sensors) are a very vital part of your car, and if it isn't working, it should be replaced as soon as possible by a licensed technician. Oxygen sensors can be hundreds of dollars, but in the end, if you go too long without repair, running the engine so rich will damage it and cost you more in fuel expenses!