An essential oil is a highly aromatic and concentrated compound that evaporates in warm temperatures and can be dissolved in vegetable oils. Essential oils are not actually oily but are highly flammable and volatile compounds. Essential oils are extracted from various plant materials - flowers, leaves, roots, resin, peel or bark. The oils are produced in one of three ways - steam distillation, expression and solvent extraction. The extraction method varies according to the essential oil being produced.

Steam distillation is the most common process and involves steam being passed over the plant parts in a still. The steam then passes into a condenser, where it produces a liquid containing both oil and water. The steam is then cooled back to water and the essential oil floats on top.
Expression is the method of extraction used to obtain essential oils from citrus fruit. Basically the essential oil is squeezed out of the peel.
Solvent extraction is a complex process used to extract the essential oils from delicate flowers such as rose, neroli and jasmine. The petals are soaked in a chemical solvent, which dissolves the aromatic fragrance out of the plant fibres. This sticky mass is called a "concrete". The concrete mass is then processed to remove the fats and waxes. The liquid that is left is called an "absolute".
Expensive essential oils such as Rose and Neroli are very difficult to extract because a large number of flowers are required to produce a small amount of essential oil.
The price of the essential oil can vary depending on the method used for extraction, the geographical location and weather conditions.