Thick sequences of organic-rich lacustrine oil shale were deposited in the Middle Permian Lucaogou Formation of the Junggar Basin and the Santanghu Basin. The mineralogy and major, trace and rare earth element geochemistry of the oil shales and mudstones collected from the Lucaogou Formation are discussed. The chondritenormalized patterns of the studied samples show LREE enrichments, HREE deficits, and generally negative Eu anomalies and positive Ce anomalies. The Paleoclimate indictor (C-value) varies between 0.08 and 0.62, reflecting generally arid to subhumid conditions. In addition, low Rb/Sr (with a mean value of 0.14) and high Sr/Cu (with a mean value of 33.22) values indicate that arid conditions prevailed during the deposition of the Lucaogou Formation. Sr/Ba ratios (0.31-7.73) of the studied samples suggest a paleoenvironment with variable salinity. The salinity of the lake is controlled by climate variations, freshwater replenishment, seawater intrusion, and redox conditions. The studied oil shales in the Lucaogou Formation are mainly derived from a felsic (dacite and rhyolite) to intermediate (andesite) source that formed in the Early Permian and mixed with small amounts of basic rocks (basalt). Volcanic eruptions provided the source rocks for the Lucaogou Formation. The chemical index of alteration (CIA), the plagioclase index of alternation (PIA), and an A-CN-K ternary diagram indicate that the parent rocks of the oil shale experienced weak to moderate chemical weathering.