One of the main challenges in crude oil extraction and refining is the formation of highly toxic intractable petroleum emulsions (oily sludge). Herein, the simultaneous demulsification and recovery of oil with low impurity content, trapped in petroleum emulsions, was investigated using supercritical water (scH(2)O). Various parameters, including temperature (350-400 degrees C), pressure (25-35 MPa), emulsion concentration (10-100 wt%), and reaction time (30-120 min) were explored to establish the optimized conditions. At 400 degrees C, the asphaltene content (23.7-3.4 wt%) and total acid number (15.4-2.8 mg-KOH/g-oil) decreased significantly, while the naphtha-to-diesel fraction increased from 9 to 21 wt%. These results indicated effective cracking of the toxic interfacially active species to form their non-toxic, non-interfacially active counterparts. By removing the interfacially active compounds that stabilize the petroleum emulsion, clear oil-water separation was achieved after conversion in scH(2)O, thereby facilitating the recovery of the upgraded oil. Additionally, heteroatoms and metallic impurities in the upgraded oil were significantly reduced [reduction efficiencies: 79% (V), 69% (Ni), 99% (Ca), 23% (S), 82% (N)]. Finally, plausible reaction mechanisms for the removal of interfacially active compounds were discussed using model compound reactions.