Braggi nailed it. With the 99-2003.5 F-250 or F-350 7.3L engine, it's almost always the Fuel/ Drain Valve.
Plan A - Buy & install a new valve assembly from Ford dealer (approx $65) or from NAPA (approx $46) or from DieselORings.com
Plan B - Buy the three o-rings from DieselOrings
for $6 + shipping. If you are in a hurry, you can buy two assorted size Viton (brown color) o-ring kits from Advance Auto for $7.99 per kit. Between the two kits, you will get the two o-rings of one size and one o-ring of smaller size that you need. Dieselorings.com has three grades of o-ring kits available - BEST Fluorosilicone (blue), BETTER brown Viton, GOOD Viton
I WENT WITH PLAN B
has a comprehensive parts list that covers most of the common repair and maintenance problems you will encounter with the 7.3L engine.
My 2000 F-250 Lariat crewcab was leaking diesel intermittently for the last couple years. Even though I'd used Superchips to chip the truck several years ago, I began noticing the smell of raw diesel right after I'd changed out the fuel/ water separator filter. As part of the process, you have to cycle the fuel drain valve open to drain all the fuel (and any water) out of the fuel bowl. I think that's when the o-rings developed a slow leak.
I did a lot of research on the internets. Sites like this and YouTube helped me diagnose and narrow down the problem.
this clip is particularly good because he deals with all THREE o-rings. There are two o-rings (see BEFORE pic) that are the same size. There is a smaller, thinner o-ring that is concealed inside the stem. When I dis-assembled the valve I found that the smaller, inner o-ring had been replaced with a cheap, non-fuel resistant rubber o-ring! That's where the leak was.
TOTAL PARTS PURCHASED:
-one T20 Torx bit $2.49 (get the short one)
-the three o-rings (Advance Auto) $16.00
-36inches high-temp fuel hose 3/8" I.D. (for attaching underneath to bottom end of fuel drain tube)
-one set of three Finger Drivers from Toolworks #TW690 (for tight spaces) available at Advance Auto for $2.99
-without chipping the engine, the 7.3L engine F-250 should be giving you 20 mpg on the highway at 2000 rpm (approx 67-70mph depending on tire size & rear differential gear ratio).
-with the engine chipped for "towing" or economy mode with even a basic chipping module (I used Superchips), you should be getting approx 26-27 mpg highway at 70 mph/ 2000rpm.
I'm not even a Shadetree Mechanic but everything I've read on the internets says that the two main things that can adversely affect economy are a fuel/drain valve leak and a clogged EBPV Exhaust Back-Pressure Valve & Tube.
Last Summer the Fuel/Water Drain Valve was in a temporary non-leaking mode and I did an EBPV Valve Sensor replacement. I also used brake cleaner and a length of thick, ribbed weedwhacker line to ream out and clean out the EBPV tube that runs from the sensor to the exhaust. On a 186 mile trip from Louisiana to Gulf Shores Alabammy I used exactly 7 gallons fuel at 70mph the whole way. I topped off the 30 gl tank before I got on the highway and topped it off again with 7.0 gls in Gulf Shores after stop & go traffice down Rte 59 in summer traffic. That's 26.6 mpg fuel economy without having to deal with that politically-correct Exhaust Fluid BS being shoved down our throats by the Environmental Industry.
Here's the best video clip I saw for dealing with the EBPV issue:
-Exhaust Back Pressure Valve sensor
-can of Brake Cleaner
I hope all this helps!