The advantage of using supercritical water (SCW) as a reaction medium for bitumen upgrading was investigated through comprehensive analyses and comparisons of the products obtained using SCW or high-pressure nitrogen. SCW showed almost no chemical effect, but it showed a dispersion effect that led to intramolecular dehydrogenation of the heavier component and prevented recombination reactions. The optimal condition for maximizing this dispersion effect was estimated using the dielectric constant and Hansen solubility parameter (HSP). The necessary condition of SCW to show good miscibility with heavy oil was when the dielectric constant was 2.2 and the HSP hydrogen bonding component was 10 MPa 0.5 . The optimal conditions were confirmed by the highest extraction yield of asphaltene and the greatest yield of upgraded oil.