The simplest way to answer this is with the phrase you probably learned in high school— “like dissolves like.” Water is a polar molecule, so it prefers to interact with other polar molecules. Oil, a hydrocarbon of some type, lacks polar groups, and forms weak Van der Waals interactions with other nonpolar molecules.

This is only partially correct, and the actual situation is quite complicated. The major force at work here is the stability of the water phase due to the hydrogen bond interactions. When a molecule of a hydrocarbon is dissolved in water, some number of hydrogen bonds must be broken. This bond breaking costs energy. When oil and water don’t mix, these hydrogen bonds outweigh the entropy gained by mixing the phases so the water molecules stick together, and the oil remains separated.