Michael Coulson scored from the spot in the 48th minute after Dave Kitson was adjudged to have handled following a corner, with the decision made by the linesman after referee Oliver Langford had seemed ready to let play go on.
Waddock felt his side would have earned a point, which would have kept them in seventh, had it not been for the spot-kick
He said: "The most disappointing part of the defeat was that decision and the delay before it was given.
"It looked as if it was going to be a 0-0. It was a very disappointing decision for us, we're just not getting any luck at the moment. Hopefully that will change in the last three games."
Oxford were shot shy in the first half, but they had a great opportunity to equalise late on after centre back Michael Raynes was thrown forward.
First Raynes scooped a shot over the bar from a great position 12-yards out, and in stoppage time he headed wide from Alfie Potter's right-wing cross.
Waddock said: "I said to the players in the dressing room at half time, that there were a couple of occasions when we were in the penalty area and someone needed to pull the trigger.
"Maybe if Michael Raynes had been more of a natural finisher he'd have put it away.
"But the pitch was very difficult to play on, very bobbly, and that maybe played a part too. It's something we need to look at going forward.
"York are a very well organised side with a good manager. They came and did a job on us.
"We now need to dust ourselves down and have just got to win the next three."