My 1990subaru legacy has been skipping real bad and black smoke is coming from exaust. When i checked oil it seemed very lean and smelled like gas.
Given the age of the car it could be bad spark plugs or a weak ignition system. Check all the plugs and inspect them with this chart in the link below. It could be a valve issue as you said you smell gas in the oil.
I'm afraid your Subaru has burnt a valve. Typically it is the right rear cylinder (looking at it from the front of the car) that burns them. this is a common problem. It's an expensive fix. There is a chance however, it may just be a fouled spark plug. Again, it's usually the right rear spark plug that fouls. You can pull each plug wire one at a time (start with the right rear one) until you find one that doesn't make the engine run worse. Then change that plug and try it. Or replace all the plugs. If one is fouled then the others may also need changing.
HTH
SOURCE: clutch is slipping real bad on my 95 subaru legacy
the flywheel may be shiny and slippery. Also the clutch may be very worn down. You will probably need to replace the clutch.While you have to remove the throwout bearing. replace that too.
SOURCE: Gas smell with Subura Legacy
there is a recall on some of the fuel lines under the hood, they get old and leak.
SOURCE: 2002 Legacy 2.5,Auto,stubbles bad in low gears
I'm gonna do this from memory because my All Data is not working. I believe that the EGR is stuck open, your getting too much ERG or getting it at the wrong time. Easy fix either free up the valve test it with a vacuum gauge erase codes and try it out.
Use shop manual easy steps in doing this.
SOURCE: 98 Subaru leaking oil
Oil leak will not change run temp but can cause a fire.
The smoke is the oil burning on the engine. The 1st thing you need to do is clean the oil off the engine.
Next top oil off to the full line on the dip stick.Now start the engine hold idle up to around 1600 rpm for 1 to 2 minutes keep engine run and look for the oil leak. Don't get caught in any moving parts and things will be hot so be careful. Most likely from your valve cover.
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