Why does water not refract light, yet everything seems distorted

what happens when light hits moving water

1) Water does refract light (n = 1.33)
2) The surface of moving water causes the angle of incidence to be time dependent; ergo, a given ray of incident light will oscillate wrt time around a mean value.

That is incorrect. Water does refract light, in fact all medium refract light to an extent. Everything seems distorted due to the light being reflected off surfaces within the water is refracted. This especially the case in moving water where the reflected light escapes at different angles