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The majority of Aromatherapy Essential Oils are made by distillation. Other techniques include solvent extraction and extraction by waxes/oils.
One simple way to understand why we have essential oils is to realise that most are in plants in the first place to provide smell! This smell can be to attact animals (who then eat the plant and spread the seed when they do the toilet), to attract insects (to pollinate the plant), to repel certain animals/insects (who may damage or kill the plant). For the smell to get into the air so that these animals/insects can detect it the chemicals that make up the smell must be "light" so they are able to drift throught the air (the technical term is volatile). This volatility is one of the reasons that they can be extracted by distillation.
Distillation is a process where the plant is mixed with water in a container and the container heated. Once the water is above a certain temperature some of the chemicals in the plant which give the smell begin to evaporate (these are sometimes called the chemical constituents). At the top of a container is a piece of apparatus called a condensor which cools the evaporated esssential oils (most often these are cooled with air or water). The liquid that forms in the condensor is collected and this is the essential oil. It is basically as simple as that. (The liquid left is known as flower water or hydrosol). The constituents of Some plants are changed by heat so are not suited to distilallation.
Solvent extraction is another way to make essentials oils. In this process the plant is mixed with a liquid called a solvent. The solvent extracts the chemicals in the plant which can disolve in it. Once the solvent has extracted the plant chemicals then the solvent is removed and the a mixture of waxes, resins and essential oil is left which is known as a "concrete". A second solvent is used to seprate the the essential oil which dissolves in the solvent from the heavier resins, waxes etc. <a href="http://woodlandherbs.co.uk/acatalog/rose_pure_essential_oil.html">Rose Absolute Essential Oil</a> is made in this way.
More modern process such as Supercritical Carbon Dioxide extraction may also be used but the costs of this are prohibitive compared to distillation and solvent extraction in many cases.
Some citrus oils may be extracted by cold pressing. This option is used as the fruit contains a lot of the oil and the raw materials are cheap.
A very small number of oils are extracted in fat/wax. Normally a press is used with the plant and oil placed in the press in layers. In this way the plant and fatl are in close contact and the plant constituents and they can transfer from the plant to the fat. The press is then used to squeeze the mix, separating the fat and the parts of the plant that are not needed. The fat is then further processed (often by separating the fat and the essential oil using alcohol as a solvent.
Once extracted essential oils can be tested and bottled for use. Testing can include determination of the relative proportions of the different constituents of the oil, sensory testing (does it smell right to an expert) and testing for unwanted residues. It may also be necessary to test for adulteration (where a specific chemical or a cheaper essential oil has been added). This is more common in more expensive oils such as rose.