Environmental policies and regulations are having profound effects on the oil industry. The industry is affected by controls on both its production and processing activities and on the use of its products. The environmental impacts of upstream activities, epitomized by the Exxon Valdez accident, are leading to more expensive tanker designs. Oil markets can be changed by sulphur controls driven by concern about acid rain and new requirements in the USA to change gasoline specifications in order to reduce urban smog. The problem of climate change and CO2 emissions poses even more fundamental challenges to the oil industry, with the prospect of reduced markets in the longer term.