Most geologists view crude oil, like coal and natural gas, as the product of compression of ancient vegetation over geological timescales. According to this theory, it was formed from the decayed remains of prehistoric marine animals and terrestrial plants. Over many centuries this organic matter, mixed with mud, was buried under thick sedimentary layers of material. The resulting high levels of heat and pressure caused the remains to metamorphose, first into a waxy material known as kerogen, and then into liquid and gaseous hydrocarbons. These then moved through adjacent rock layers until they became trapped underground in porous rocks called reservoirs, forming an oil field, from which the liquid can be extracted by drilling and pumping.

Alternative theories
Thomas Gold was the most widely known Western proponent of the Russian-Ukrainian theory of abiogenic petroleum origin. This theory suggests that large amounts of carbon exist naturally in the planet, some in the form of hydrocarbons. Hydrocarbons are lighter than rocks so they seep upward. Deep microbial life convert them into the various hydrocarbon deposits.

There is also a new theory, presented in Scientific American in 2003, which proposes that hydrocarbons are generated by active nuclear activity in the Earth's core.