Heat the oil in a skillet or pot over medium heat. Saute the onions, jalapeño, and garlic until tender, about 3-4 minutes. Add the chili powder, cumin, sugar, and salt and stir in the pan for another minute so that the spices can get slightly toasted and fragrant. Add the tomato sauce and water.* Bring the sauce to a simmer and left cook 5 minutes. Taste for seasoning and adjust salt as needed.
Transfer the sauce to a blender and whirl until smooth. Store in a jar or an airtight container for up to 5 days. The sauce can also be frozen or canned as you would other tomato-based sauces. This recipe makes enough sauce for one 9x13 inch pan of enchiladas.