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I assume the fuel to be oil or petrol, something not miscible with water. Water has a dielectric constant much higher than most substances, so if the fuel/water mixture is made the dielectric of the tuning capacitor of an oscillator, then the oscillator frequency will be lower the greater the proportion of water. Theres something to experiment with,for a start.
what about a simple test of conductivity between 2 electrodes?
a square wave can be used to avoid corrosion due to electrolisis(if d.c. is used).
i have a circuit like this used to detect water. might work for this too. the circuitis quite simple.