There are alot of variables here.
1. Why would there of been water in the tank, or did you mean water in the tank at the gas station?
2. What color is the smoke? white, black, or grey
3. If the O2 sensor just went bad it can cause you to run rich, and throw a code.
4. Have you contacted the gas station and filed a complaint about the gas? Depending if the owner is honest, you may be able to have them pay for any repairs if the gas is determined to be the cause of something going wrong. Only applies if #1 is the gas station.
The O2 sensor will not be reset by just driving the car on the highway. It may burn carbon and buildup off, but it will stll have to be reset.
If you drive your car to operating temps (at least 20 minutes) each time you go anywhere, I would guess the O2 sensor went bad. Replace and enjoy.
As I re-read your post you may want to check and make sure none of the wires for the O2 sensor are burnt or close to a heat source, as that could cause the voltage drop.
Hope this helps