In a large pot or dutch oven, melt butter in olive oil over medium heat.
Toss in onions and saute until they are translucent and gaining a golden brown color, about 5 minutes. Add in garlic and cook for one minute, stirring to make sure the garlic doesn't burn.
Add tomato paste, stir well and cook for a minute or two, making sure it doesn't burn, then pour in tomatoes and stir well.
Stir in sugar, oregano, and bay leaves, then cover the pot, lower the temperature to medium-low, and simmer for 15 minutes to 2 hours. The longer you simmer, the more time the flavors have to meld together.
Remove bay leaves and take pot off the heat. Season to taste with sugar, salt and pepper.
Optional: blend the sauce well in a blender if you want a smooth sauce.