You didn't say what the difference is in your MPG, but yes, going to a larger tire will almost always hurt MPG. There are some exceptions. Basically you decreased the leverage your engine has, to move the vehicle. So the engine has to work harder (use more gas) to do the same things it did before.
As already mentioned, the increase in tire diameter, which affects how far the vehicle moves per tire revolution, also needs to be taken into account.
You said that your old tires were essentially bald. Going from a tire with little to no tread left, to a new tire with full tread will increase the rolling resistance from the tires.
The rubber was also likely much harder on the old tires, than it was when the tires were new. Old, dried out rubber that doesn't deform as much as it rolls, decreases rolling resistance, but the downside is that traction is also decreased.
Tread pattern also affects rolling resistance. Basically the more aggressive the tread is, the worse the rolling resistance and thus MPG is.
I recall a test of one manufacturers line of light truck tires. They all had the same casing construction, but different tread patterns. The H/T tires got the best MPG. The A/T tires got a bit worse MPG. The M/T tires got the worst MPG.
Lots of people run tires with an aggressive tread, strictly for the look, and never intend to take the vehicle off-road. So whether knowingly or not, they live with the compromise of that aggressive tread on the street.
Some people run a highway tread tire for it's superior on-road characteristics, despite it's relatively sedate tread appearance, and less capable off-road abilities.
Tires are all about compromise. You just need to decide what aspects of a tires characteristics are most important to you.
