Although, no one can surely say how petroleum or oil is formed, the most widely accepted theory is that it is formed by chemical alteration of organic matter subjected to high T&P(temperature & pressure) conditions...Pressure is generated by the deposition of sedimentary layers on the organic matter and heat from mantle portion of the Earth...
http://www.buzzle.com/articles/how-is-oil-formed.html
http://www.buzzle.com/articles/how-is-oil-formed.html
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