Why does petrol create a rainbow on water?

Petrol when mixed with water, like every oil compound, it creates a thin layer of oil film above the surface of the water. This layer of oil reflects light. As there are multiple layers and each varies in thickness across the surface.

So, when light hits the surface it reflects back. As there are multiple layers and for each and every layer  light with different wave length reflects light back while some goes further in and is reflected off the surface of the water below the oil layer. As the light waves travel different distances before being reflected, the angle of reflection is also different and it therefore produces different colours. These different colours mix together producing a rainbow like appearance. This phenomenon is called thin-film interference.

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