The need for efficient demulsification process to treat emulsions in the petroleum industry is well acknowledged. For decades, numerous researches have been conducted to examine mechanisms of emulsification and demulsification. Untreated emulsion has both technical and commercial implications in the industry, especially in terms of treatment facilities, refining and transportation. Effective treatment is needed to ensure optimum production of hydrocarbons. The present paper is to review reported works on the formation of petroleum emulsions, demulsification treatments, characteristics of fit-for-purpose demulsifiers as well as research trends in emulsion treatment. Crude oils are naturally combined with natural surfactants having high tendency to form stable emulsion. The stable emulsion must be treated well to meet industrial requirements since crudes with a high volume of stable emulsion have a less value. Therefore, fundamental studies on natural surfactants, which contribute to the emulsion stability, are analyzed for the effective separation of emulsions into oil and water. This would involve the assessment of various reported mechanisms for the emulsification and right formulation for effective demulsification. © 2020, The Author(s).