Bill D is close to correct.

The microfloras and microfaunas, plus degraded plant material, are the main sources of the organic matter in the sediments. Rapid burial of organic-rich sediments, avoiding oxidation of these materials, and with the right temperature-time relationships following burial, hydrocarbons are formed. If there is sufficient pressure to move the hydrocarbons to adjacent porous sediments (hopefully connected to the source bed), these porous sediments (the reservoir) may contain sufficient volumes of hydrocarbons to make production possible.

If temperatures and pressures have been insufficient to convert the hydrocarbons to a liquid stage and express them to porous sediments, and the organic matter or proto-hydrocarbon is very abundant, the proto-hydrocarbons and hydrocarbons remain in or close to the source; one then may have reserves in oil sands or oil shales.

If temperatures and pressures become very high, the liquid hydrocarbons may be lost, but often dry gas is formed and preserved.
Areas near mountain building, or buried very deeply, are most likely to lose their liquid hydrocarbons.

Those of us who have worked in petroleum research and exploration are very familiar with these processes, which must be taken into account when looking for possible new oil areas.