My humble guess is that ou have a failed O2 Sensor, and it's feeding more
gas than is needed because it always thinks the engine is cold.

When the O2 Sensor is cold, it feeds more gas, kinda like the choke circuit
in the olden days of carburators. As the O2 Sensor heats up, it sends a
Heated Up Now signal to the computer, and the computer then sets about to
lean the mixture. My guess is that your O2 Sensor has failed in a mode where
it refuses to send the Heated Up Now signal, hense the mixture remains rich
long after it should have leaned out.

Your car is OBD I compliant, this means you need a BMW technician to pull
codes to see if the O@ Sensor is reporting that it is slow to heat up. The
newer ('96 and later) cars are OBD II, and they give a code for this that
you can easily download yourself. Not much point in discussing OBD II with
you, you are stuck with OBD I -- as am I.

There is a way to pull codes on your car by holding your tongue just the
right angle and switching the ignition ON and mashing the gas pedal just
right in a very specific amount of time.

The most likely culprit is the coolant temperature sensor that is feeding
the computer.  Another possibility is the coolant system thermostat.  If the
engine is always cold or if the computer thinks that the engine is cold it
will feed too much fuel.  A failed oxygen sensor can result in a somewhat
richer mixture but not to this extent.  The oxygen sensor just does not have
the authority to enrich the mixture by this amount.  On one occasion, my
friendly local mechanic destoyed the thread in my 318i exaust manifold while
he was attempting to replace my oxygen sensor.  We had to put a plug in it.
I drove the car for a month without an oxygen sensor until I could find a
good time to replace the manifold.  The effect on my gas mileage was very
minor - only 2 or 3 mpg not the 10 mpg that you are experiencing.
The OBC uses the length of the fuel injector pulse to determine how much
fuel is being injected and compute the mileage displayed.  The fact that it
agrees with your poor mileage should rule out worn injectors and faulty fuel
pressure regulator because they would enrich the mixture without affecting
the injector pulse length.

A worn rotor arm will really kill the mpg on this car, we replaced it
and the dizzy cap on my mate's 88 320iA and he got another 5mpg and a
LOT more high end power.