Can you walk me through the story of how Sai Baba lit lamps using water instead of oil?

Certainly. Sai Baba had a great love for lighting lamps and would celebrate the festival of lights by collecting oil from local shopkeepers. As Chapter 5 recounts, the grocers eventually grew tired of this and conspired to refuse him. When Baba came for oil as usual, they all said no. He returned quietly to the mosque, took his tin pot which had a tiny bit of oil left, and poured water into it. He then drank this mixture as an offering to Brahman. Afterwards, he filled the lamps with plain water, soaked the wicks, and miraculously lit them. The lamps burned all night long, to the astonishment of the grocers.