This paper summarizes studies to determine the formation process of water-in-oil emulsions and the stability of such emulsions formed in the laboratory and in a large test tank. These studies have confirmed that water-in-oil mixtures can be grouped into four states: stable emulsions, unstable water-in-oil mixtures, mesostable emulsions, and entrained water. These states are differentiated by rheological properties as well as by differences in visual appearance. The viscosity of a stable emulsion at a shear rate of one reciprocal second is about three orders of magnitude greater than that of the starting oil. An unstable emulsion usually has a viscosity no more than about 20 times greater than that of the starting oil. A stable emulsion has a significant elasticity, whereas an unstable emulsion does not. A mesostable emulsion has properties between stable and unstable, but breaks down within a few days of standing. The usual situation is that emulsions are either obviously stable, mesostable, or unstable. Entrained water, water suspended in oil by viscous forces alone, is also evident. Very few emulsions have questionable stability. Analytical techniques were developed to test these observations. The type of emulsion produced is determined primarily by the properties of the starting oil. The most important of these properties are the asphaltene and resin content and the viscosity of the oil. The composition and property ranges of the starting oil that would be required to form each of the water-in-oil states are discussed in this paper.