More than in many other countries, the oil market in West Germany is traditionally characterised by liberal trade patterns. This open market allowed a virtually free inflow of oil products. Hence, the pressure on prices at Rotterdam's spot market affected directly the product prices for German consumers. In all end-product markets, oligopoly and strong competition by outsiders prevail. If the cutthroat competition is intensified, this may lead to an alteration of the supply structure within the group of the quite heterogeneous market participants. The West German oil industry is passing through a period of painful economic adjustments. The shrinking of the market, changing demand patterns, and financial losses have led to the shedding of considerable over-capacity in refining and distribution. The process includes both a drastic reduction of simple (straight-run) distillation capacity and an increase in conversion potential, along with toll refining, reduction of marketing outlets, concentration of participants in processing and distribution, attempts at optimisation of downstream activities within the Common Market area, as well as the promotion of joint ventures with foreign state companies. The approach to the adaptation process varies from company to company according to upstream and downstream strength, financial position, access to sources of supply, international linkages, and special areas of interest. Of course, over-capacity of refining is a global phenomenon that cannot be eliminated without international co-operation. The problems may, after all, become even more complex after new export refineries in OPEC countries have been completed. This paper presents the results and features that reflect the reaction of the main companies affected. It describes the chances and challenges of a free oil market system. In recent years the petroleum industry in Germany has suffered heavy financial losses, and has embarked on a radical and seemingly successful adaptation process, but it remains vulnerable to developments on the world oil market. It would gain from better co-ordinated policies within the framework of the European Community—including a free play of market forces and a standardisation of environmental controls. Farther afield, the necessity for closer links to the government-controlled companies in producing countries is perceived to secure sources of supply on a basis of mutual advantage.