10 mpg isn't normal, even my TJ with 35's and a 4" SL + 1" body lift gets 14.6 mpg on the highway. I'd suspect a bad O2 sensor, especially since they do eventually go bad. The O2 sensors set the air/fuel ratio and if one goes bad and erroneously reports a lean fuel condition it'll cause the PCM to set it to full rich which will wreck the mpg as well as reduce power.
One more thing that can affect mpg is the rpms being too low which can cause the engine to lug on the highway. Regearing my TJ to 5.38 for its 35's boosted its mpg from sub-12 to 14.6. With your 31's I doubt it's lugging on the highway at normal highway speeds but is your driving mostly around town which will reduce mpg, or do you tend to drive slowly on the highway which would cause lower rpms/lugging?