The 13 closed basins off Southern California are fault blocks having rectangular outlines, steep slopes, and flat floors. They are similar to the now-filled Los Angeles Basin and, thus, serve as keys for estimating the original environment of deposition of sediments in that oil-rich area. Water below the basin sills is replenished at a sufficiently rapid rate that its oxygen concentration is not appreciably less than that of the open ocean. In contrast, the interstitial water at a depth of a few feet in the sediments contains no free oxygen. Oxidation of phytoplankton debris falling through the water column results in loss of about 93 per cent. About 50 per cent of the organic matter which reaches the bottom is oxidized before it becomes buried to the depth of zero free oxygen. Only minor losses occur in the anaerobic zone of the sediment; consequently, most of the organic matter which reaches that zone is preserved even when the mud is compacted to shale. Only about 0.15 per cent of this deeply buried organic matter is eventually recovered as oil in the Los Angeles Basin. Thus, the processes by which phytoplankton becomes converted into oil are very inefficient. Comparison of the various basins permits estimation of optimum environments for oil accumulation.