The key is to infuse flavours into the oil in a fairly gentle process. High heat and blackened chillies will cook out the subtle flavours and aromas that make a good chilli oil.
Dried chillies - the amount depends on the type of chilli and your heat tolerance. I've used about equal amounts of dried chillies (Thai and Ghost chillies from the garden) to oil. Give the chillies a gentle crush to help them out a bit.
1 cup peanut oil - make sure it is a good one where you can actually taste peanuts if you dip a finger in it.
2-3 tablespoons toasted sesame oil - again, taste it to make sure it will actually add flavour to the end product.
Aromatics - it's up to you really, but I've got a couple tablespoons each of dried garlic, cinnamon quills, Sichuan peppercorns (you could just use peppercorns, but they're not as good), star anise and a few bay leaves.
Step 1: So Simple It Can Fit in One Step!
Turn off the heat and drop in the rest of the aromatics (e.g. garlic, bay leaves - anything likely to burn if you cook it too hard or long) and dump in the chillies. Finish off by adding the sesame oil.
Let it cool and transfer to a glass jar to let the flavours infuse and intensify.
After a day or two, strain the solids out so that you are left with an amazing spicy oil that will change your life...and keep in the fridge for many weeks or even months.