However, what I don't understand is how biological organic matter, primarily consisting of proteins and cellulose-based materials get transformed under natural conditions into lower mocelular weight hydrocarbons that have a HIGHER energy potential than the starting material.

Are you (or anyone else out there) aware of a step-by-step mechanism whereby the proteins from say dinosaur flesh or the cellulose from ancient ferns, get converted into things like hexane or octane, both of which have a considerable higher energy potential than either the dead dinosaurs or ferms?  

Nor do I think you can explain this by anaerobic biological fermentation, because unless there is a significant infusion of external energy, the products of fermentation have a lower energy potential than the starting material.

It strikes me from my layman's exposure to the subject that most of the explanations of oil formation deal mainly with the geology of oil deposits and don't give much attention to the actual chemistry of how one substance gets transformed into another. For me, it is not enough to say that the dead biological material got 'cooked' for several millions of years; one needs to explain what is actually happening during that cooking and whether the thermodynamics point in a direction toward rather than away from the relatively low-molecular weight hydrocarbons that characterize crude oil.