If you're getting only 18 miles to the gallon, there's something wrong here, and probably more than just the O2 sensor.

If you haven't done so, work your way through Chapter 1 of the Haynes book. Check your Fuel Pressure Regulator and make sure there's no trace of fuel in the vacuum line leading to it (otherwise you have a ruptured diaphram and the FPR must be replaced). Also pull your vacuum hoses and replace them if you find hard/firm hoses or hard/cracked ends where they push onto the nipples. Pull your accordian tube, bend and flex it while looking for hairline cracks. Also pull your IAC Valve and clean it well, make sure the valve swings back and forth easily when you quickly twist the motor body in your hand. Also change your air filter if you haven't done so within the last 2 oil changes.

Make sure the temperature sensor that goes to the computer is working properly (there is a seperate one that controls the dash-gauge). Also check for vacuum leaks around the intake manifold. Check for dragging or stuck brake calipers by putting your hand on each wheel after a drive (check for unusual heat buildup). And lastly, check the AMM if necessary (swap with a known good one if you have one, I keep a spare in the car next the spare Fuel Pump relay and Fuel Pressure Regulator).

On to the O2 sensor. Just because you can get a good voltage reading off the O2 sensor doesn't mean that it's good. As these sensors slowly die, the car will enrichen the mixture to compensate for a low output signal. The sensor will then come up to the proper voltage, but the car will be running rich to achieve this 'correct' output. The old sensors from the 70s and early 80s would last about 30,000 to 100,000 miles, but the newer ones can go much longer. You can kill an O2 sensor in about 5 miles if you have any kind of antifreeze contamination in your combustion chamber or silicon contamination. Running too rich for too long can also compromise it's output (like with a stuck IAC valve). For more info on O2 sensor life expectancies and how to test them, please read the following post:
http://www.brickboard.com/RWD/index.htm?id=683406

For my own personal vehicles, non-Bosch O2 sensors typically had a catastrophic failure after about 2 years or less. True Bosch sensors, have had a 5+ year reliable service record, however, I plan to replace my current Bosch sensor at about 5 years simply to keep the gas mileage up as best as I can. The new sensor will more than pay for itself in the long run.

Other sites to read that have relavent information:
http://www.homestead.com/volvo2/O2sensor.html

http://www.brickboard.com/RWD/index.htm?id=618018&show_all=1

God bless,
Fitz Fitzgerald.
--
'87 Blue 245, NA 229K

The 50k replacement was for older models I don't think the Haynes manual(get the Bentley) is correct for your year. Not bad PM though has a bad O2 can cook the cat. The the challenge is getting it out if rusty. My 1990 lasted to 275K. Replaced it with a $50 universal Walker.

They last about 125k miles. You are overdue.