Fig. 1  Interference of light on a thin film

Fig. 2  Interference of light caused by reflection from the interfaces of different media produces colorful pattern.

Why do rainbow-like colors appear on the surface of oil?

When petrol is dropped on the road during a rainy day, a thin layer of oil will appear on the water surface. Both the top and bottom surfaces of this oil film can reflect light. If the path difference between two light rays is an integral times of the wavelength, there will be constructive interference (Fig .1). A light ray will pass through different thickness of oil when the angle of reflection varies. The wavelength corresponding to the constructive interference also differs and this causes the reflected light to have various colours. As a result, a rainbow-like colour pattern is shown on the oil surface and this phenomenon is called thin-film interference.