The state controlled China Daily said farmers were making $1,000 a month from the scam, which is partly being driven by China's rocketing demand for fuel.
The farmers, based near Yan'an and Yulin cities, have been selling the stolen oil to small refineries.
The paper said their plastic bags, when full, weighed 50kg (8 stone).
One of the farmers involved told the paper that local people had not benefited from the region's recent oil development.
"Because of a decrease in our farmland, we have no land for crops and have no way to get money out of the land," he said.
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