Toyota Repair: My 99 Camry is giving 14mpg, oxygen sensors, valve seals

Question
I have a v4, automatic transmission camry with 112,000 miles. I have a lot to the car; Gave it a tune up, changed the oxygen sensors, fuel injection cleaner kit etc. and it still keeps waisting a lot of gas. The car also has a little bit of light blue smoke coming from the muffler at morning startup. My mechanic says that there is a valve seal leak and it would cost $450 to fix. He tells me that it could be why the car is waisting gas. Can anyone validate his reasoning? I don't want to spend so much money fixing something and still have the gas problem to worry about.  

Answer
The blue smoke at start ups is caused by leaking valve seals, it has nothing to do with fuel consumption, I don't know what method you are using to calculate the mileage but if the engine was using an excessive amount of fuel the onboard computer would see this as a problem and turn the check engine light on.