first off, welcome to the forum. yes you need an o2 sensor. if it's the one after the catalytic converter, then all it does is monitor the catalyst to make sure it's still doing what it's supposed to do. i don't know if it will work on a wrangler or not, but on my mustang i was able to put a spark plug non-fouler on the end of the o2 sensor (after i removed the cat) and i never got a check engine light. it catches enough exhaust to give a reading, but not enough to give a bad reading. they were only like $4 at autozone. does your state require emissions testing? if so, you'll have to have a cat on it. there should be no ill effects to gas mileage or power. to turn the check engine light off, disconnect your battery and let it sit for a little while.