UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q


[X]     QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR 15(d) OF THE SECURITIES
        EXCHANGE  ACT  OF  1934

     For  the  quarterly  period  ended  April  30,  1999

                                       OR

[ ]     TRANSITION  REPORT  PURSUANT  TO  SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE  ACT  OF  1934

     For the transition period from _________________ to _________________


                       Commission file number:  000-24394

                             PENN OCTANE CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

             DELAWARE                                52-1790357
(State  or  Other  Jurisdiction  of     (I.R.S. Employer  Identification  No.)
  Incorporation  or Organization)


900  VETERANS  BOULEVARD,  SUITE  240,  REDWOOD  CITY,  CALIFORNIA      94063
     (Address of Principal Executive Offices)                         (Zip Code)

Registrant's  Telephone  Number,  Including  Area  Code:    (415)  368-1501

     Indicate  by  check  mark whether the registrant: (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.
Yes    X    No
    ----

     The number of shares of Common Stock, par value $.01 per share, outstanding
on  June  11,  1999  was  11,188,830.

                                        1
<PAGE>
<TABLE>
<CAPTION>
                                PENN OCTANE CORPORATION
                                   TABLE OF CONTENTS

         ITEM                                                                    PAGE NO.
         ----                                                                    --------
<S>      <C>                                                                     <C>
Part I   1. Financial Statements

            Consolidated Balance Sheets as of April 30, 1999 (unaudited)
            and July 31, 1998                                                         3-4

            Consolidated Statements of Operations for the three and nine months
            ended April 30, 1999 and 1998 (unaudited)                                   5

            Consolidated Statements of Cash Flows for the nine months
            ended April 30, 1999 and 1998 (unaudited)                                   6

            Notes to Consolidated Financial Statements (unaudited)                   7-18

         2. Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                               19-25

Part II  1. Legal Proceedings                                                          26

         2. Changes in Securities                                                      26

         3. Defaults Upon Senior Securities                                            26

         4. Submission of Matters to a Vote of Security Holders                        26

         5. Other Information                                                          26

         6. Exhibits, Financial Statement Schedules, and Reports on Form 8-K        26-29
</TABLE>

                                        2
<PAGE>
PART  I
ITEM  1.
<TABLE>
<CAPTION>
                                      PENN OCTANE CORPORATION AND SUBSIDIARIES

                                             CONSOLIDATED BALANCE SHEETS

                                                       ASSETS


                                                                                             April 30,
                                                                                                1999       July 31,
                                                                                            (Unaudited)      1998
                                                                                            ------------  ----------
<S>                                                                                         <C>           <C>
Current Assets
 Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    675,804  $  157,513
 Trade accounts receivable, less allowance for doubtful accounts of $418,796 and $418,796.     2,174,292   1,195,653
 Inventories (note D). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       483,797     377,097
 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . .        95,789      90,851
                                                                                            ------------  ----------
   Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,429,682   1,821,114
Property, plant and equipment - net (note C) . . . . . . . . . . . . . . . . . . . . . . .     3,161,441   2,908,251
Lease rights (net of accumulated amortization of $512,906 and $478,560). . . . . . . . . .       641,133     675,479
CNG assets held for sale (note E). . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,200,000   1,293,137
Other noncurrent assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        39,708           -
                                                                                            ------------  ----------
   Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  8,471,964  $6,697,981
                                                                                            ============  ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>
                                  PENN OCTANE CORPORATION AND SUBSIDIARIES

                                   CONSOLIDATED BALANCE SHEETS - CONTINUED

                                    LIABILITIES AND STOCKHOLDERS' EQUITY


                                                                               April 30,
                                                                                 1999           July 31,
                                                                              (Unaudited)         1998
                                                                            ---------------  ---------------
<S>                                                                         <C>              <C>
Current Liabilities
 Current maturities of long-term debt (notes G and H). . . . . . . . . . .         705,599   $    1,693,897
 Revolving line of credit (note I) . . . . . . . . . . . . . . . . . . . .               -          991,823
 Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . .       3,002,942        2,050,575
 Borrowings from IBC-Brownsville (note L). . . . . . . . . . . . . . . . .               -          672,552
                                                                                 1,739,288        1,555,262
                                                                            ---------------  ---------------
 Accrued liabilities
   Total current liabilities . . . . . . . . . . . . . . . . . . . . . . .       5,447,829        6,964,109
Long-term debt, less current maturities (note G) . . . . . . . . . . . . .               -           60,000
Commitments and contingencies (note I) . . . . . . . . . . . . . . . . . .               -                -
Stockholders' Equity (note H)
 Series A -  Preferred stock-$.01 par value, 5,000,000 shares authorized;
 0 convertible shares issued and outstanding at April 30, 1999 and
 July 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               -                -
 Series B  - Senior Preferred stock-$.01 par value, 5,000,000 shares
 authorized; 90,000 and 0 shares issued and outstanding at April 30,
 1999 and July 31, 1998. . . . . . . . . . . . . . . . . . . . . . . . . .             900                -
 Common stock-$.01 par value, 25,000,000 shares authorized;
 11,188,830 and 9,952,673 shares issued and outstanding at April 30,
 1999 and July 31, 1998. . . . . . . . . . . . . . . . . . . . . . . . . .         111,889           99,527
 Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . .      15,830,489       13,318,592
 Notes receivable from the president of the Company and a related party
 for exercise of warrants, less reserve of $223,000 at April 30, 1999 and
 July 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (  2,763,006)    (  2,763,006)
 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . .   (  10,156,137)   (  10,981,241)
                                                                            ---------------  ---------------
   Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . .       3,024,135       (  326,128)
                                                                            ---------------  ---------------
     Total liabilities and stockholders' equity. . . . . . . . . . . . . .  $    8,471,964   $    6,697,981
                                                                            ===============  ===============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>
                                         PENN OCTANE CORPORATION AND SUBSIDIARIES

                                          CONSOLIDATED STATEMENTS OF OPERATIONS

                                                       (UNAUDITED)


                                                                      Three Months Ended           Nine Months Ended
                                                                      ------------------           -----------------
                                                                    April 30,     April 30,     April 30,     April 30,
                                                                       1999          1998          1999          1998
                                                                   ------------  ------------  ------------  ------------
<S>                                                                <C>           <C>           <C>           <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 8,841,244   $ 7,840,952   $23,672,837   $24,197,199
Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . .    7,933,161     7,240,120    21,256,379    22,295,428
                                                                   ------------  ------------  ------------  ------------
 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . .      908,083       600,832     2,416,458     1,901,771
                                                                   ------------  ------------  ------------  ------------
Selling, general and administrative expenses
 Legal and professional fees. . . . . . . . . . . . . . . . . . .      117,404       122,971       544,103       470,990
 Salaries and payroll related expenses. . . . . . . . . . . . . .      223,467       210,710       640,165       543,117
 Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       31,679        42,827       111,784       123,926
 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      191,279       187,174       449,479       366,393
                                                                   ------------  ------------  ------------  ------------
                                                                       563,829       563,682     1,745,531     1,504,426
                                                                   ------------  ------------  ------------  ------------
 Operating income . . . . . . . . . . . . . . . . . . . . . . . .      344,254        37,150       670,927       397,345
Other income (expense)
 Interest expense . . . . . . . . . . . . . . . . . . . . . . . .     (134,951)   (  100,535)   (  428,025)   (  260,144)
 Interest income. . . . . . . . . . . . . . . . . . . . . . . . .        1,442        59,476         2,739       176,336
 Award from litigation (note L) . . . . . . . . . . . . . . . . .            -             -       987,114             -
                                                                   ------------  ------------  ------------  ------------
   Income (loss) from continuing operations before taxes. . . . .      210,745      (  3,909)    1,232,755       313,537
Provision for income taxes. . . . . . . . . . . . . . . . . . . .            -             -             -             -
                                                                   ------------  ------------  ------------  ------------
                   Income (loss) from continuing
     operations . . . . . . . . . . . . . . . . . . . . . . . . .      210,745      (  3,909)    1,232,755       313,537
Discontinued operations, net of taxes (note E)
           (Loss) from operations of CNG segment. . . . . . . . .     ( 72,666)     ( 39,155)    ( 275,488)    ( 222,372)
                                                                   ------------  ------------  ------------  ------------
   Net income (loss). . . . . . . . . . . . . . . . . . . . . . .  $   138,079   $ (  43,064)  $   957,267   $    91,165
                                                                   ============  ============  ============  ============
Income (loss) from continuing operations
per common share (note B) . . . . . . . . . . . . . . . . . . . .  $      0.01   $   (  0.00)  $      0.11   $      0.01
                                                                   ============  ============  ============  ============
Net income (loss) per
common share (note B) . . . . . . . . . . . . . . . . . . . . . .  $      0.00   $   (  0.00)  $      0.08   $   (  0.01)
                                                                   ============  ============  ============  ============
Income (loss) from continuing
operations per common share
assuming dilution (note B). . . . . . . . . . . . . . . . . . . .  $      0.01   $   (  0.00)  $      0.10   $      0.01
                                                                   ============  ============  ============  ============
Net income (loss) per
common share assuming dilution (note B) . . . . . . . . . . . . .  $      0.00   $   (  0.00)  $      0.08   $   (  0.01)
                                                                   ============  ============  ============  ============
The accompanying notes are an integral part of these statements.
The accompanying notes are an integral part of these statements.
Weighted average common shares outstanding. . . . . . . . . . . .   10,983,467     9,764,127    10,466,197     8,993,546
                                                                   ============  ============  ============  ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5
<PAGE>
<TABLE>
<CAPTION>
                                   PENN OCTANE CORPORATION AND SUBSIDIARIES

                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                 (UNAUDITED)


                                                                                    Nine  Months  Ended
                                                                                   ---------------------
                                                                                  April 30,      April 30,
                                                                                     1999           1998
                                                                                 ------------  --------------
<S>                                                                              <C>           <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   957,267   $      91,165
Adjustments to reconcile net income to net cash used in (provided by) operating
Activities:
 Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . .      187,144         204,948
 Amortization of lease rights . . . . . . . . . . . . . . . . . . . . . . . . .       34,345          34,346
          Amortization of loan discount . . . . . . . . . . . . . . . . . . . .      141,382          56,250
 Interest income from related party notes receivables . . . . . . . . . . . . .            -     (   172,512)
 Award from litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (  987,114)              -

Changes in current assets and liabilities:
 Trade accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . .   (  978,639)   (  2,449,635)
 Related party receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .            -          24,592
 Costs and estimated earnings in excess of billing on uncompleted contracts . .            -         187,634
 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (  106,700)     (  121,526)
 Prepaids and other current assets. . . . . . . . . . . . . . . . . . . . . . .       20,800       (  28,768)
 Deferred registration costs. . . . . . . . . . . . . . . . . . . . . . . . . .            -      (  479,870)
 Construction and trade accounts payable. . . . . . . . . . . . . . . . . . . .      978,644       1,674,565
 Billings in excess of costs and estimated earnings on uncompleted contracts. .            -        (  7,596)
 Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . .            -       (  11,010)
 Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      496,258         274,008
                                                                                 ------------  --------------
   Net cash  (used in) provided by operating activities . . . . . . . . . . . .      743,387      (  723,409)

Cash flows from investing activities:
 Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (  337,475)     (  134,353)
 CNG assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .            -      (  983,445)
                                                                                 ------------  --------------

   Net cash used in investing activities. . . . . . . . . . . . . . . . . . . .   (  337,475)   (  1,117,798)

Cash flows from financing activities:
 Revolving credit facilities. . . . . . . . . . . . . . . . . . . . . . . . . .   (  991,823)        386,328
 Issuance of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -       1,500,000
 Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .    1,152,500       1,131,250
 Reduction in debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (  48,298)     (  938,850)
                                                                                 ------------  --------------
   Net cash provided by financing activities. . . . . . . . . . . . . . . . . .      112,379       2,078,728
                                                                                 ------------  --------------

     Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . .      518,291         237,521
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . .      157,513          31,142
                                                                                 ------------  --------------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   675,804   $     268,663
                                                                                 ============  ==============
Supplemental disclosures of cash flow information:
 Cash paid during the period for:
   Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   320,710   $     244,495
                                                                                 ============  ==============
Supplemental disclosures of noncash transactions:
 Preferred stock, common stock and warrants issued. . . . . . . . . . . . . . .  $ 1,385,385   $   1,520,651
                                                                                 ============  ==============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        6
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  A  -  ORGANIZATION

Penn  Octane  Corporation, formerly International Energy Development Corporation
(IEDC)  and The Russian Fund, a Delaware corporation, was incorporated on August
27,  1992.  On  October 21, 1993, IEDC acquired Penn Octane Corporation, a Texas
corporation, whose primary asset was a liquid petroleum gas (LPG) pipeline lease
agreement  (Pipeline  Lease)  with  Seadrift  Pipeline Corporation (Seadrift), a
subsidiary  of  Union  Carbide Corporation (Union Carbide).  On January 6, 1995,
the  Board  of  Directors  approved  the  change  of  IEDC's name to Penn Octane
Corporation.  The  Company  is  engaged primarily in the business of purchasing,
transporting  and  selling  LPG  and  has provided services and equipment to the
compressed  natural  gas  (CNG)  industry.  Substantially  all  of the LPG sales
volume  since  inception  has been to PMI Trading Limited (PMI), a subsidiary of
Petroleos  Mexicanos  (PEMEX),  the  Mexican  state  owned  oil  company.

In  February 1997, the Company formed Wilson Acquisition Corporation, a Delaware
corporation  and  a  wholly-owned subsidiary, for the purpose of engaging in the
business  of designing, constructing, installing and servicing equipment for CNG
fueling stations and related products for use in the CNG industry throughout the
world.  The  subsidiary's  name was changed to PennWilson CNG, Inc. (PennWilson)
in  August  1997.

In  October  1997,  the  Company  formed  Penn  CNG Holdings, Inc. (Holdings), a
Delaware  corporation  and  a  wholly-owned  subsidiary.  In  February 1998, the
Company  formed PennWill, S.A. de C.V., Camiones Ecologicos, S.A. de C.V., Grupo
Ecologico  Industrial,  S.A. de C.V., Estacion Ambiental, S.A. de C.V., Estacion
Ambiental  II,  S.A.  de C.V., and Serinc, S.A. de C.V. (collectively Estacion),
all Mexican corporations.  To date there has not been significant operations for
any  of  these  entities.

     During  May 1999, the Company sold certain CNG related assets to a director
and  officer  of the Company (see note E).  As a result of the sale, the Company
is no longer in the CNG business and has reflected the historical results of the
CNG  segment  as discontinued operations.  All prior periods have been restated.

     BASIS  OF  PRESENTATION
     -----------------------

     The  accompanying  financial  statements  include  the  Company  and  its
subsidiaries,  PennWilson  and Holdings (Company).  All significant intercompany
accounts  and  transactions  are  eliminated.

The  unaudited  consolidated  balance  sheet  as of April 30,1999, the unaudited
consolidated  statements of operations for the three and nine months ended April
30,  1999  and 1998, and the unaudited consolidated statements of cash flows for
the  nine months ended April 30, 1999 and 1998 have been prepared by the Company
without  audit.  In  the opinion of management, the financial statements include
all  adjustments  (which include only normal recurring adjustments) necessary to
present  fairly  the unaudited consolidated financial position of the Company as
of  April  30, 1999 and the unaudited consolidated results of operations for the
three  and nine months ended April 30, 1999 and 1998, and unaudited consolidated
cash  flows  for  the  nine  months  ended  April  30,  1999  and  1998.

Certain  information  and  footnote  disclosures  normally included in financial
statements  prepared in accordance with generally accepted accounting principles
have  been  omitted.  These  financial  statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report  on  Form  10-K  for  the  year  ended  July  31,  1998.

Certain  reclassifications have been made to prior period balances to conform to
the  current  presentation. All reclassifications have been applied consistently
to  the  periods  presented.

                                        7
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  B  -  INCOME  (LOSS)  PER  COMMON  SHARE

Income  (loss)  per  share  of  common stock is computed on the weighted average
number  of  shares  outstanding.  During  periods  in which the Company incurred
losses,  giving  effect to common stock equivalents is not presented as it would
be  antidilutive.

The  FASB issued Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings  Per  Share", which supersedes Accounting Principles Board Opinion No.
15 (APB 15), "Earnings Per Share".  The statement became effective for financial
statements  issued for periods ending after December 15, 1997, including interim
periods.  Early  adoption  was  not  permitted.

The following table presents reconciliations from income (loss) per common share
to income (loss) per common share assuming dilution (see note H for the warrants
and  convertible  preferred  stock):

<TABLE>
<CAPTION>
                                 For the three months ended April 30,1999    For the nine months ended April 30,1999
                                 -----------------------------------------  -----------------------------------------
                                 Income (Loss)      Shares      Per-Share   Income (Loss)      Shares      Per-Share
                                  (Numerator)    (Denominator)    Amount     (Numerator)    (Denominator)    Amount
                                 --------------  -------------  ----------  --------------  -------------  ----------
<S>                              <C>             <C>            <C>         <C>             <C>            <C>
Income (loss) from continuing
 operations . . . . . . . . . .  $     210,745               -           -  $   1,232,755               -           -
                                 --------------
Net income (loss) . . . . . . .        138,079               -           -        957,267               -           -
                                 --------------
Less:  Dividends on preferred
 stock. . . . . . . . . . . . .     (  132,162)              -           -     (  132,162)              -           -
BASIC EPS
Income (loss) from continuing
 operations available to
 common stockholders. . . . . .         78,583      10,983,467  $     0.01      1,100,593      10,466,197  $     0.11
                                                                ==========                                 ==========
Net income (loss) available to
common stockholders . . . . . .          5,917      10,983,467  $     0.00        825,105      10,466,197  $     0.08
                                                                ==========                                 ==========
EFFECT OF DILUTIVE SECURITIES
Warrants. . . . . . . . . . . .              -          96,167           -              -          58,341           -
Convertible Preferred Stock . .              -         237,273           -              -          76,765           -
DILUTED EPS
Income (loss) from continuing
 operations available to
 common stockholders. . . . . .         78,583      11,316,907  $     0.01      1,100,593      10,601,303  $     0.10
                                                                ==========                                 ==========
Net income (loss) available to
 common stockholders. . . . . .  $       5,917      11,316,907  $     0.00        825,105      10,601,303  $     0.08
                                 ==============  =============  ==========  ==============  =============  ==========
</TABLE>

                                        8
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  B  -  INCOME  (LOSS)  PER  COMMON  SHARE  (CONTINUED)

<TABLE>
<CAPTION>
                                  For the three months ended April 30,1998    For the nine months ended April 30,1998
                                 ------------------------------------------  ------------------------------------------
                                 Income (Loss)      Shares       Per-Share   Income (Loss)      Shares       Per-Share
                                  (Numerator)    (Denominator)    Amount      (Numerator)    (Denominator)    Amount
                                 --------------  -------------  -----------  --------------  -------------  -----------
<S>                              <C>             <C>            <C>          <C>             <C>            <C>
Income (loss) from continuing
 operations . . . . . . . . . .  $    (  3,909)              -           -   $     313,537               -           -
                                 --------------
Net income (loss) . . . . . . .      (  43,064)              -           -          91,165               -           -
                                 --------------
Less:  Dividends on preferred
 stock. . . . . . . . . . . . .              -               -           -      (  225,000)              -           -
BASIC EPS
Income (loss) from continuing
 operations available to
 common stockholders. . . . . .       (  3,909)      9,764,127  $  (  0.00)         88,537       8,993,546  $     0.01
                                                                ===========                                 ===========
Net income (loss) available to
 common stockholders. . . . . .      (  43,064)      9,764,127  $  (  0.00)     (  133,835)      8,993,546  $  (  0.01)
                                                                ===========                                 ===========
EFFECT OF DILUTIVE SECURITIES
Warrants. . . . . . . . . . . .              -               -           -               -         596,280           -
Convertible Preferred Stock . .              -               -           -               -         666,607           -
DILUTED EPS
Income (loss) from continuing
 operations available to
 common stockholders. . . . . .  n/a             n/a            $      n/a          88,537      10,256,434  $     0.01
                                                                ===========                                 ===========
Net income (loss) available to
 common stockholders. . . . . .  $         n/a   n/a            $      n/a   n/a             n/a            $      n/a
                                 ==============  =============  ===========  ==============  =============  ===========
</TABLE>

                                        9
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  C  -  PROPERTY,  PLANT  AND  EQUIPMENT

          Property,  plant  and  equipment  consists  of  the  following:

<TABLE>
<CAPTION>
                                       April 30,        July 31,
                                         1999            1998
                                    --------------  --------------
<S>                                 <C>             <C>
LPG:
 Building. . . . . . . . . . . . .  $     173,500   $     173,500
 LPG terminal. . . . . . . . . . .      3,426,440       3,426,440
 Automobile and equipment. . . . .        388,839         391,137
 Office equipment. . . . . . . . .         35,738          35,738
 Capital construction in progress.        504,913          75,389
 Leasehold improvements. . . . . .        291,409         291,409
                                    --------------  --------------
                                        4,820,839       4,393,613
Less: accumulated depreciation and
 amortization. . . . . . . . . . .   (  1,659,398)   (  1,485,362)
                                    --------------  --------------
                                    $   3,161,441   $   2,908,251
                                    ==============  ==============
</TABLE>

NOTE  D  -  INVENTORIES

     Inventories  consist  of  the  following:

<TABLE>
<CAPTION>
               April 30,  July 31,
                  1999      1998
               ---------  --------
<S>            <C>        <C>
LPG:
 Pipeline . .  $ 349,180  $276,938
 LPG terminal    134,617   100,159


               $ 483,797  $377,097
               =========  ========
</TABLE>

                                       10
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  E  -  DISCONTINUED  OPERATIONS

During May 1999, the Company and PennWilson completed the sale of assets related
to  the CNG business to a company ("Buyer") controlled by a director and officer
of  the Company.  Under the terms of the sale, the Buyer purchased approximately
$1,200,000  of  the  CNG  assets  from the Company and PennWilson, consisting of
equipment,  inventory,  and intangible assets (the "Assets").  The Buyer did not
purchase  any  cash  or accounts receivable, and did not assume any pre-existing
liabilities  of the Company's CNG business.  The selling price of the Assets was
based on the book values of the Assets, which approximates the fair market value
of  the  Assets  sold,  as  of  the  date  of  closing.

In  connection  with  the  sale,  the Company received promissory notes totaling
$1,200,000 from the Buyer (the "Notes"), which will be paid over sixty months or
earlier,  under  certain  conditions.  Proceeds  received in connection with the
sale  will be used to satisfy remaining obligations related to the Company's CNG
business  and  for working capital.  In connection with the Notes, the Buyer has
pledged  all  the  Assets  as  additional  collateral, as well as proceeds to be
received  from  future  sales  of  the Assets or from the leasing of the Assets.
Under  the terms of the Notes, the Buyer paid $50,000 at closing and the officer
and  director  was required to pledge as additional collateral all stock held in
the Buyer and 200,000 warrants to purchase 200,000 shares of common stock of the
Company.

As a result of the sale, the Company has effectively disposed of its CNG segment
and has discontinued operations of that segment.  In accordance with APB 30, the
results  of  operations  related  to  the  CNG  segment  have  been  recorded as
discontinued operations for all periods presented in the Company's Form 10-Q for
the  quarterly period ended April 30, 1999.  The Assets of the CNG segment to be
sold  are  presented  separately  for all periods presented.  As a result of the
sale,  the  Company  did  not  record  any  material  gains  or  losses.


NOTE  F  -  NYDOT  CNG  FUELING  STATION

During the year ended July 31, 1998, the Company recorded additional revenues of
$821,994  related  to change-orders for additional work performed by the Company
in  connection  with the construction of equipment for a CNG fueling station for
the  New York City Department of Transportation (NYDOT).  The change-orders have
been submitted to the customer for approval.  During March 1998, the Company was
requested  to  furnish  additional  documentation  with respect to the submitted
change-orders  which  was  subsequently  provided on May 15, 1998.  On April 30,
1998,  the  Company  received  notification  from  the  general contractor, A.E.
Schmidt Environment ("AES"), that the Company was in default under the agreement
between  AES  and  the  Company  relating to the NYDOT CNG fueling station.  The
Company has responded to AES indicating that AES is in default with the terms of
the  agreement and that the Company is awaiting satisfactory resolution of these
matters  prior to completion of the remaining work outlined under the agreement.
The Company is currently exploring legal remedies available (see note I).  As of
July 31, 1998, the Company revised its estimate related to the work preformed in
connection  with  the  change-orders.  As  a result of this revision the Company
reduced  revenues  associated with the change-orders by $500,000 and recorded an
allowance  for doubtful accounts of $321,994.  In connection with this contract,
the Company does not anticipate a material amount of additional costs associated
with  either completion of the contract or subsequent warranties provided for in
the  contract.

For  the  three  months  and  nine  months ended April 30, 1998, the Company had
recorded  additional  revenues  of  $0  and  $821,994,  respectively, related to
change-orders  in  connection  with  the  NYDOT  CNG  fueling  station.

                                       11
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  G  -  LONG-TERM  DEBT

     Long-term  debt  consists  of  the  following:

<TABLE>
<CAPTION>
                                                                                       April 30,    July 31,
                                                                                          1999        1998
                                                                                       ----------  ----------
<S>                                                                                    <C>         <C>
Contract for Bill of Sale; due in semi-annual payments of $22,469, including interest
at 11.8%; due in October 1998; collateralized by a building.. . . . . . . . . . . . .  $   42,899  $   91,197

Unsecured note with principal due in equal annual installments of $20,000
beginning June 5, 1998, plus interest at the prime rate due June 5, 2002 (note H).. .           -     100,000

Note issued in connection with settlement of vendor obligation.  Principal due in
monthly installments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      62,700      62,700

Promissory notes, with warrants to purchase up to 250,000 shares of common stock
at an exercise price of $6.00 per share expiring October 21, 2000 and warrants to
purchase up to 337,500 shares of common stock at an exercise price of $1.75 per
share expiring November 30, 2001; principal due June 30, 1999, or from proceeds
received by the Company from any public offering of debt or equity of the Company
in excess of $2,250,000.  Promissory notes are secured by an assignment of net
proceeds received by the Company in connection with the Judgment; interest at
10.0% on the principal amount of the promissory notes is due quarterly on March
31, June 30, September 30 and December 31.  The effective interest rate after
consideration of the discount, is 18.0% per annum. Purchasers of the promissory
notes were granted one demand registration right with respect to the shares issuable
upon exercise of the warrants (note H). . . . . . . . . . . . . . . . . . . . . . . .     600,000   1,500,000

                                                                                          705,599   1,753,897
Current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     705,599   1,693,897
                                                                                       ----------  ----------
                                                                                       $        -  $   60,000
                                                                                       ==========  ==========
</TABLE>

     NOTE  H  -  STOCKHOLDERS'  EQUITY

          PREFERRED  STOCK
          ----------------

SERIES  A  -  PREFERRED  STOCK:  CONVERSION

On September 18, 1993, in a private placement, the Company issued 150,000 shares
of its $.01 par value, 11% convertible, cumulative non-voting preferred stock at
a  purchase  price  of $10.00 per share (the Series A Preferred Stock).  On June
10,  1994  the  Company  declared a 2-for-1 stock split.  The Series A Preferred
Stock  was  convertible  into  voting shares of common stock of the Company at a
conversion  ratio  of  one share of Series A Preferred Stock for 3.333 shares of
common  stock.  On  September  10,  1997,  the Board of Directors of the Company
approved  the  issuance  of  an  additional 100,000 shares of common stock as an
inducement  for  the  preferred  stockholders  to convert the shares of Series A
Preferred  Stock  and  release all rights with respect to the Series A Preferred
Stock.  In January 1998, all 270,000 shares of the Series A Preferred Stock were
converted  into  an  aggregate of 999,910 shares of common stock of the Company.
The issuance of the additional 100,000 shares of common stock of the Company was
recorded  as a preferred stock dividend in the amount of $225,000 at January 30,
1998.

                                       12
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  H  -  STOCKHOLDERS'  EQUITY  -  Continued

          SERIES  B,  CLASS  A  SENIOR  PREFERRED  STOCK

     On  March  3,  1999,  the  Company  completed  an  exchange  of $900,000 of
promissory  notes  for  90,000  shares of the Company's Series B, Class A Senior
Preferred  Stock  (the Senior Preferred Stock) at a purchase price of $10.00 per
share.  The  Senior Preferred Stock is non-voting and dividends are payable at a
rate  of  12%  annually,  payable in cash or in kind, semi-annually.  The Senior
Preferred Stock may be converted in whole or in part at any time at a conversion
ratio  of  one share of Senior Preferred Stock for 4.0 shares of common stock of
the  Company.  In  connection  with  the  exchange,  the  holder  of  the Senior
Preferred  Stock  received  50,000 shares of common stock of the Company and may
receive  an  additional  50,000  shares  of  common stock of the Company, if the
Senior  Preferred  Stock  is  not  redeemed by the Company prior to September 3,
1999.  The Company has granted one demand registration right with respect to any
common  stock of the Company which may be acquired and/or received by the holder
of  the  Senior Preferred Stock in connection with the transaction.  The Company
and  the  holder of the Senior Preferred Stock have agreed to share the costs of
the  registration.  The  issuance  of  the  50,000 shares of common stock of the
Company  was  recorded as a preferred stock divided in the amount of $115,000 at
April  30,  1999.

     COMMON  STOCK
     -------------

          On  November  13,  1998,  the  Company issued 250,000 shares of common
stock  of  the  Company  and warrants to purchase 125,000 shares of common stock
with  an  exercise price of $1.25 per warrant and an expiration date of November
12,  2000  for  an amount of $250,000.  Net proceeds from the sale were used for
working  capital  purposes.

          On  December  14,  1998,  the  Company issued 500,000 shares of common
stock  of  the  Company  and warrants to purchase 300,000 shares of common stock
with  an  exercise price of $1.75 per warrant and an expiration date of December
13,  2003  for  an amount of $500,000.  Net proceeds from the sale were used for
working  capital  purposes.

          During December 1998, the Company issued 53,884 shares of common stock
of  the  Company  to  Zimmerman  Holdings  Inc.  (ZHI)  as  payment for and full
cancellation  of  a  note  payable  of  $100,000  and related interest and other
obligations  totaling  $18,000 and the cancellation of any further obligation to
pay  any  future  royalties in connection with Company's purchase of certain CNG
assets  from  Wilson  Technologies  Inc.,  a  wholly  owned  subsidiary  of ZHI.

          During  December,  1998,  the  Company  issued 15,000 shares of common
stock of the Company and warrants to purchase 10,000 shares of common stock with
an  exercise  price  of $3.25 per warrant and an expiration date of December 31,
2000  in  exchange  for  cancellation  of  all  outstanding obligations totaling
approximately  $26,000 and other obligations as outlined in an agreement between
the  parties.

          On  March  18, 1999, the Company issued 120,000 shares of common stock
of  the  Company  and warrants to purchase 60,000 shares of common stock with an
exercise price of $2.25 per warrant and an expiration date of March 18, 2002 for
an amount of $150,000.  Net proceeds from the sale were used for working capital
purposes.

          On March 19, 1999, the Company issued 60,106 shares of common stock of
the  Company  and  warrants  to  purchase  30,303 shares of common stock with an
exercise price of $2.59 per warrant and an expiration date of March 19, 2002 for
an amount of $100,000.  Net proceeds from the sale were used for working capital
purposes.

          On  March  19, 1999, the Company issued 146,667 shares of common stock
of  the  Company  and warrants to purchase 73,333 shares of common stock with an
exercise price of $2.42 per warrant and an expiration date of March 19, 2002 for
an amount of $220,000.  Net proceeds from the sale were used for working capital
purposes.

                                       13
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

     NOTE  H  -  STOCKHOLDERS'  EQUITY  -  Continued

          In  connection  with  the  stock  issuances in March 1999, the Company
issued a total of 35,000 shares of common stock of the Company, representing the
fees  associated  with  the  transactions.

          STOCK  AWARD  PLAN
          ------------------

Under the Company's 1997 Stock Award Plan, the Company has reserved for issuance
150,000  shares  of  Common  Stock,  of which 124,686 shares were unissued as of
April 30, 1999, to compensate consultants who have rendered significant services
to  the  Company.  The Plan is administered by the Compensation Committee of the
Board  of  Directors  of  the  Company  which  has  complete authority to select
participants,  determine  the awards of Common Stock to be granted and the times
such  awards  will  be granted, interpret and construe the 1997 Stock Award Plan
for  purposes of its administration and make determinations relating to the 1997
Stock  Award Plan, subject to its provisions, which are in the best interests of
the  Company  and  its  stockholders.  Only  consultants  who  have  rendered
significant  advisory  services  to  the Company are eligible to be participants
under  the  Plan.  Other  eligibility  criteria  may  be  established  by  the
Compensation  Committee  as  administrator  of  the  Plan.

     In  October  1997,  the  Company  issued 20,314 shares of Common Stock to a
Mexican  consultant  in  payment  for services rendered to the Company valued at
$113,000  pursuant  to  the  plan.

     In  April  1999,  the  Company  issued  5,000  shares  of Common Stock to a
consultant  in  payment  for  services  rendered to the Company valued at $8,750
pursuant  to  the  plan.

NOTE  I  -  COMMITMENTS  AND  CONTINGENCIES

     LITIGATION

On  August  24, 1994, the Company filed an Original Petition and Application for
Injunctive  Relief  against  the  International  Bank  of  Commerce-Brownsville
("IBC-Brownsville"),  a  Texas  state  banking  association,  seeking (i) either
enforcement  of  a  credit facility between the Company and IBC-Brownsville or a
release of the Company's property granted as collateral thereunder consisting of
significantly  all of the Company's business and assets; (ii) declaratory relief
with  respect  to  the  credit  facility;  and  (iii)  an  award for damages and
attorneys' fees.  After completion of an arbitration proceeding, on February 28,
1996, the 197th District Court in and for Cameron County, Texas entered judgment
(the  "Judgment") confirming the arbitral award for $3,246,754 to the Company by
IBC-Brownsville.

In  connection  with the lawsuit, IBC-Brownsville filed an appeal with the Texas
Court  of  Appeals  on  January 21, 1997.  The Company responded on February 14,
1997.  On September 18, 1997, the appeal was heard by the Texas Court of Appeals
and on June 18, 1998, the Texas Court of Appeals issued its opinion in the case,
ruling  essentially in favor of the Company.  IBC-Brownsville sought a rehearing
of  the  case  on  August  3,  1998.  On December 30, 1998, The Court denied the
IBC-Brownsville  request  for  rehearing.  On February 16, 1999, IBC-Brownsville
filed  a  petition  for review with the Supreme Court of Texas.  On May 10, 1999
the Company responded to the Supreme Court of Texas' request for response of the
Petitioner's  petition  for  review.  On  May  27, 1999, IBC-Brownsville filed a
reply  with  the  Supreme  Court  of  Texas  to  the  Company's  response of the
Petitioner's  petition for review.  On June 10, 1999, the Supreme Court of Texas
denied  the  Petitioner's  petition  for  review.  As of April 30, 1999, the net
amount  of  the  Judgment is approximately $3,700,000, which is comprised of (i)
the  original  judgment,  including  attorneys'  fees, (ii) post-award interest,
(iii)  cancellation of the note and accrued interest payable to IBC-Brownsville,
less  attorneys'  fees.  There  is  no  certainty  that IBC-Brownsville will not
continue  to  seek  other  legal  remedies  against  the  Judgment.

For  the  nine  months  ended April 30, 1999, the Company has recorded a gain of
approximately  $987,000,  which  represents the amount of the Judgment which was
recorded as a liability on the Company's balance sheet at December 31, 1998 (see
note L).  The remaining net amount of the Judgment to be realized by the Company
is  approximately  $3,700,000, less attorneys fees.  The Company will record the
remaining  amount  of the Judgment when it realizes the proceeds associated with
the  Judgment.

                                       14
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  I  -  COMMITMENTS  AND  CONTINGENCIES  -  Continued

On  April  18,  1996,  the  Company  reached  an  agreement (the "IBC Settlement
Agreement")  to  accept  $400,000  to  settle a lawsuit it filed in October 1995
against  International  Bank  of  Commerce-San  Antonio,  a  bank  related  to
IBC-Brownsville  ("IBC-San  Antonio").  As part of the settlement agreement, the
parties, including IBC-Brownsville and IBC-San Antonio, executed mutual releases
from  future  claims  related  to the IBC-Brownsville litigation.  Additionally,
IBC-San  Antonio  agreed  to  indemnify  the Company for any such claims made or
asserted.

On  June  26,  1996,  IBC-Brownsville filed a suit against the Company (Case No.
96-06-3502) in the 357th Judicial District Court of Cameron County alleging that
the  Company,  in  filing the Judgment against IBC-Brownsville in order to clear
title  to  its  assets,  slandered the name of IBC-Brownsville.  IBC-Brownsville
contends  that  the  Judgment  against  it  prevented  it  from  selling certain
property.  IBC-Brownsville  has claimed actual damages of $600,000 and requested
punitive  damages  of  $2,400,000.  On September 23, 1996, the court entered the
Judgment on behalf of the Company and indicated in a preliminary ruling that the
Company  was  privileged  in  filing  the Judgment to clear title to its assets.

On July 30, 1996, the Company filed suit in the District Court of Harris County,
Texas  against  Jorge  V.  Duran,  former  Chairman of the Board of the Company,
regarding  alleged  conversion  and  fraud  by  Mr.  Duran during his time as an
employee  of the Company.  The Company has not yet quantified its damages and is
seeking a declaration that the termination of employment of Mr. Duran was lawful
and  within  the rights of the Company based on Mr. Duran's status as an at-will
employee  of  the Company.  On December 12, 1996, Mr. Duran filed a counterclaim
in  the  District  Court of Harris County, Texas asserting the following claims:
breach  of  contract  against  the  Company  and Mr. Richter; wrongful discharge
against  the  Company,  Mr.  Richter, and Mr. Mark Casaday, a former officer and
director  of  the Company; defamation against the Company, Mr. Richter, Mr. Mark
Casaday,  and  Mr. Jorge Bracamontes; and interference with contract against Mr.
Jorge Bracamontes.  On February 27, 1997, the two actions were consolidated into
Case  No.  96-37447,  Penn  Octane  Corporation  v.  Jorge V. Duran in the 164th
District  Court  of  Harris  County,  Texas and on September 30, 1998, Mr. Duran
filed a Fourth Amended Original Petition.  Mr. Duran is seeking judgment against
the  Company  and Messrs. Richter, Casaday and Bracamontes for damages in excess
of  $12,000,000,  including  prejudgment  interest  as  provided for by law, and
attorneys' fees and such further relief to which he may be justly entitled.  The
Company  intends  to  vigorously  defend  against  Mr.  Duran's  counterclaim.

On  October  14,  1998, a complaint was filed by Amwest Surety Insurance Company
("Amwest")  naming  as  defendants,  among  others,  PennWilson  and the Company
seeking  reimbursement  for  payments  made  to  date by Amwest of approximately
$160,000  on claims made against the performance and payment bonds in connection
with  services  provided  by suppliers, laborers and other materials and work to
complete the NYDOT contract (Vendors).  These amounts have already been recorded
in  the  Company's  balance  sheet  at  April  30, 1999.  In addition, Amwest is
seeking  reimbursement  of approximately $600,000 for claims presented to Amwest
against  the  performance and payment bonds, but have not yet been authorized or
paid  to  date  by  Amwest.  In  May  1999, the Company and PennWilson reached a
settlement  agreement  whereby  Amwest will be reimbursed by PennWilson $160,000
for  the  payments  made  to  the Vendors, with the Company acting as guarantor.
Upon  satisfactory  payment  Amwest  will  dismiss  its related claims as to the
payment  bond.  The  Company  is  currently  considering  its  legal options and
intends  to  vigorously  defend  against the additional $600,000 for claims made
against  the  performance  bond  but  not  yet  paid  by  Amwest  (see  note F).

The  Company  and  its  subsidiaries  are  also involved with other proceedings,
lawsuits  and  claims.  The  Company  is of the opinion that the liabilities, if
any,  ultimately resulting from such proceedings, lawsuits and claims should not
materially  affect  its  consolidated  financial  position.

                                       15
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  I  -  COMMITMENTS  AND  CONTINGENCIES  -  Continued

CREDIT  FACILITY,  LETTERS  OF  CREDIT  AND  OTHER

In  connection  with  the  PMI  Sales  Agreement, invoicing occurs weekly.  From
November  1996  to  early November 1997, the Company and PMI made an arrangement
under  which  PMI  provided financing on the Company's behalf under the terms of
the  Company's  supply  agreement with Exxon, the Company's main supplier.  As a
result  of  this  arrangement,  invoicing  occurred  on a monthly, rather than a
weekly  basis.

On  October 22, 1997, the Company entered into a $6,000,000 credit facility with
RZB  Finance  L.L.C.  (RZB)  for demand loans and standby letters of credit (RZB
Credit  Facility)  to finance the Company's purchase of LPG and propylene (PPL).
Under  the  RZB  Credit  Facility,  the  Company pays a fee with respect to each
letter  of credit thereunder in an amount equal to the greater of (i) $500, (ii)
1.5%  of  the maximum face amount of such letter of credit, or (iii) such higher
amount  as  may  be agreed between the Company and RZB.  Any amounts outstanding
under  the RZB Credit Facility shall accrue interest at a rate equal to the rate
announced  by the Chase Manhattan Bank as its prime rate plus 2.5%.  Pursuant to
the  RZB  Credit Facility, RZB has sole and absolute discretion to terminate the
RZB  Credit  Facility  and  to  make  any  loan  or  issue  any letter of credit
thereunder.  RZB  also  has  the  right to demand payment of any and all amounts
outstanding  under  the RZB Credit Facility at any time.  In connection with the
RZB  Credit  Facility,  the  Company  granted  a mortgage, security interest and
assignment  in any and all of the Company's real property, buildings, pipelines,
fixtures  and  interests  therein  or  relating  thereto,  including,  without
limitation, the lease with the Brownsville Navigation District of Cameron County
for  the  land  on which the Company's Brownsville Terminal Facility is located,
the  Pipeline Lease, and in connection therewith entered into leasehold deeds of
trust, security agreements, financing statements and assignments of rent.  Under
the  RZB Credit Facility, the Company may not permit to exist any lien, security
interest,  mortgage,  charge  or  other  encumbrance of any nature on any of its
properties  or  assets, except in favor of RZB, without the consent of RZB.  The
Company's  President,  Chairman  and  Chief  Executive  Officer  has  personally
guaranteed  all  of  the  Company's  payment obligations with respect to the RZB
Credit  Facility.  Upon  establishment  of  the  RZB  Credit Facility, beginning
November  11,  1997,  PMI  no  longer  provided  any  financing on behalf of the
Company, and the Company  began  invoicing  PMI  on  a  weekly  basis.

Effective  April  22,  1998, the aggregate amount available under the RZB Credit
Facility  was  increased  to  $7,000,000.  In  January 1999, the fee charged for
letters  of  credit  issued  was  increased  to  2.5%.

In  connection  with  the  Company's purchases of LPG from Exxon and/or PG&E NGL
Marketing,  L.P. (PG&E), the Company issues letters of credit on a monthly basis
based  on  anticipated  purchases.

As  of  April  30,  1999,  letters  of  credit  established under the RZB Credit
Facility  in favor of Exxon and PG&E for purchases of LPG totaled $6,000,400 and
$335,000  of  which  $1,870,082  and  $341,811  were being used to secure unpaid
purchases  from  Exxon  and PG&E as of April 30, 1999.  In connection with these
purchases,  as  of  April 30, 1999, the Company had unpaid invoices due from PMI
totaling  $1,849,769  and  cash  balances  maintained in the RZB Credit Facility
collateral  account  of  $717,816.

NOTE  J  -  REALIZATION  OF  ASSETS

     The accompanying financial statements have been prepared in conformity with
generally  accepted accounting principles, which contemplate continuation of the
Company  as  a  going concern.  The Company has had an accumulated deficit since
inception,  has used cash in operations, has a deficit in working capital and is
delinquent under certain loan and lease agreements.  In addition, the Company is
involved in litigation, the outcome of which cannot be determined at the present
time.  As  discussed in note A, the Company has historically depended heavily on
sales  to  one  major  customer.

                                       16
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  J  -  REALIZATION  OF  ASSETS  -  Continued

     In view of the matters described in the preceding paragraph, recoverability
of  a  major  portion of the recorded asset amounts as shown in the accompanying
consolidated balance sheet is dependent upon the collection of the Judgment, the
Company's  ability to obtain additional financing and to raise additional equity
capital,  and  the  success  of  the Company's future operations.  The financial
statements  do  not  include  any  adjustments related to the recoverability and
classification  of  recorded  asset  amounts  or  amounts  and classification of
liabilities  that might be necessary should the Company be unable to continue in
existence.

     To  provide  the Company with the ability it believes necessary to continue
in existence, management is taking steps to 1) collect the Judgment, 2) increase
sales  to  its  current  customers, 3) increase its customer base, 4) extend the
terms  and capacity of the Pipeline Lease and the Brownsville Terminal Facility,
5)  expand its product lines and 6) raise additional debt and/or equity capital.

     At  July  31,  1998,  the  Company had net operating loss carryforwards for
federal income tax purposes of approximately $8,826,000.  The ability to utilize
such  net  operating  loss  carryforwards  may  be  significantly limited by the
application of the "change of ownership" rules under Section 382 of the Internal
Revenue  Code.

NOTE  K  -  CONTRACTS

     LPG  BUSINESS

     The  Company  has entered into a sales agreement (Agreement) with its major
customer,  PMI,  to  provide  a  minimum  monthly  volume  of LPG to PMI through
September  30,  1999.  During  October 1998, the Company was purchasing LPG on a
month-to-month  basis from Exxon Company, U.S.A. (Exxon), its major supplier, to
meet  the minimum monthly volumes required in the Agreement.  Effective November
1,  1998,  the  Company  entered  into  a supply contract with Exxon to purchase
minimum  monthly  volumes  of  LPG  through  September  1999 under payment terms
similar to those required in the Agreement.  The supply price is below the sales
price  provided  for  in  the  Agreement.

NOTE  L  -  AWARD  FROM  LITIGATION

     On  December  31,  1998,  the  Company received notification from the Texas
Court  of  Appeals  that  the  request by IBC-Brownsville for a rehearing of the
previous  appellate  decision upholding the judgment of The State District Court
(the  "Judgment")  against  IBC-Brownsville  in favor of the Company, was denied
(see  note  I).

As  a  result of that decision, IBC-Brownsville had exhausted all legal remedies
under  the  appeals  process  available  to  it.  On  February  16,  1999,
IBC-Brownsville  petitioned the Supreme Court of Texas to hear its case.  On May
10,  1999  the  Company  responded  to  the  Supreme Court of Texas' request for
response  of  the  Petitioner's  petition  for  review.  On  May  27,  1999,
IBC-Brownsville  filed  a reply with the Supreme Court of Texas to the Company's
response  of  the  Petitioner's  petition  for  review.  On  June  10, 1999, the
Supreme Court of Texas denied the Petitioner's petition for review.  There is no
certainty  that  IBC-Brownsville  will not continue to seek other legal remedies
against  the  Judgment.

As  a result of the above, the Company will record the gain when it realizes the
proceeds  associated  with  the  Judgment.  Due  to  the  fact that the Judgment
included an offset related to a liability, which the Company had recorded on its
balance sheet, the Company has realized a portion of the Judgment, which relates
to  that  liability.  When  the  cash  portion of the Judgment is collected, the
Company  will  record  the  remaining  amount  of  the  Judgment.

                                       17
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  L  -  AWARD  FROM  LITIGATION  -  Continued

For the nine months ended April 30, 1999, the Company has recorded a gain to the
extent  of the amount which was recorded as a liability on the Company's balance
sheet  at  December  31,  1998  totaling  $987,114.

NOTE  M  -  SUBSEQUENT  EVENTS

     During  May  1999,  the Company entered into separate settlement agreements
with  a  legal  firm  and  a supplier (the "Creditors") in connection with prior
services  performed  for  the  Company.  Under the terms of the settlements, the
Company  has  agreed  to  make  specified  payments  totaling  $550,000  to  the
Creditors.  At  the  time  of  the  settlements,  the  Company had approximately
$614,000  of accrued liabilities recorded in connection with amounts owed to the
Creditors.  In  connection  with  the settlements, the Company has agreed in the
future to provide a "Stipulation of Judgment" to the Creditors in the event that
the  Company  defaults  under  the  settlement  agreements.

                                       18
<PAGE>
ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
             RESULTS  OF  OPERATIONS

     The  following  discussion  of  the  Company's  results  of  operations and
liquidity  and  capital  resources  should  be  read  in  conjunction  with  the
Consolidated  Financial  Statements  of  the  Company  and related Notes thereto
appearing  elsewhere  herein.  References to specific years preceded by "fiscal"
(e.g.  fiscal  1999)  refer  to  the  Company's  fiscal year ended July 31.  The
results of operations related to the Company's CNG segment, primarily consisting
of  PennWilson,  which began operations in March 1997, have been included in the
Company's  results  of  operations for fiscal 1999 and 1998, have been presented
separately  as  discontinued  operations.

OVERVIEW

     The  Company  has  been principally engaged in the purchase, transportation
and  sale of LPG and, since 1997, the provision of equipment and services to the
CNG  industry.  Beginning  July  1994,  the  Company has bought and sold LPG for
distribution  into  northeast  Mexico  and  the  U.S.  Rio  Grande  Valley.

     Historically,  the  Company  has  derived substantially all of its revenues
from sales to PMI, its primary customer, of LPG purchased from Exxon.  In fiscal
1998,  the  Company derived approximately 95% of its revenues from sales of LPG,
of  which  sales  to  PMI  accounted  for  nearly  100%  of  total  LPG  sales.

     As  part  of  its  business  strategy,  in  March 1997 the Company acquired
certain assets and hired certain former employees from WTI, a company engaged in
the  engineering,  design  and construction of equipment for turnkey CNG fueling
stations.  In  connection  with  this acquisition, the Company paid $394,000 and
was  committed  to  pay  up  to $2.0 million in royalty payments based on future
sales,  if  any.  The  acquisition  was accounted for as a purchase and has been
reflected  as  such in the Company's consolidated financial statements beginning
in  fiscal  1997.

     The  Company's  CNG revenues were previously derived from contracts awarded
on a fixed-price, as-completed basis.  During May 1999, the Company entered into
an  agreement  to  sell  certain  of  the  CNG assets.  The Company is no longer
pursuing  business  opportunities related to CNG (see note E to the Consolidated
Financial  Statements)  and  is  once  again  focusing  primarily  on  its  LPG
operations,  including  the  expansion  of  its  pipeline  facilities.

     The  Company  provides  products  and  services  through  a  combination of
fixed-margin and fixed-price contracts.  Under the Company's agreements with its
customers  and  suppliers,  the  buying  and  selling prices of LPG are based on
variable  posted  prices  that  provide  the Company with a fixed margin.  Costs
included  in costs of goods sold other than the purchase price of LPG may affect
actual  profits from sales, including costs relating to transportation, storage,
leases,  maintenance  and financing.  The Company generally attempts to purchase
in volumes commensurate with projected sales. However, mismatches in volumes and
prices  of  LPG  purchased  from  Exxon  and  resold  to  PMI  could  result  in
unanticipated  costs.

                                       19
<PAGE>
LPG  SALES

     The  following table shows the Company's volume sold in gallons and average
sales  price of LPG for the three and nine months ended April 30, 1999 and 1998.

<TABLE>
<CAPTION>
                              Three Months Ended      Nine Months  Ended
                            ----------------------  ----------------------
                            April 30,   April 30,   April 30,   April 30,
                               1999        1998        1999        1998
                            ----------  ----------  ----------  ----------
<S>                         <C>         <C>         <C>         <C>
Volume Sold
 LPG (millions of gallons)        30.7        23.6        84.7        64.8

Average sales price

 LPG (per gallon). . . . .  $     0.29  $     0.32  $     0.28  $     0.37
</TABLE>

RESULTS  OF  OPERATIONS

     THREE  MONTHS  ENDED  APRIL  30,  1999 COMPARED WITH THE THREE MONTHS ENDED
APRIL  30,  1998

     Revenues.  Revenues  for  the  three  months ended April 30, 1999 were $8.8
million compared with $7.8 million for the three months ended April 30, 1998, an
increase  of $1.0 million or 12.8%.  This increase was attributable to increased
volumes  of  LPG sold during the three months ended April 30, 1999, resulting in
an  increase in sales of $2.1 million, partially offset by a decrease in average
sales  price  for  LPG during the three months ended April 30, 1999 of $804,976.

     Cost of sales.  Cost of sales for the three months ended April 30, 1999 was
$8.0  million  compared  with  $7.2 million for the three months ended April 30,
1998,  an  increase  of $693,040 or 9.6%.  This increase was attributable to the
increase  in  volume  of  LPG sold during the three months ended April 30, 1999,
resulting in an increase in cost of goods sold of $1.7 million, partially offset
by  the  decrease  in  average purchase price for LPG purchased during the three
months  ended  April  30,  1999  of  $850,307.

     Selling,  general  and  administrative  expenses.  Selling,  general  and
administrative  expenses were $563,829 for the three months ended April 30, 1999
compared with $563,682 for the three months ended April 30, 1998, an increase of
$147  or  0.0%.

     Other income and expenses, net.  Other income (expense), net was ($133,509)
for  the three months ended April 30, 1999 compared with ($41,059) for the three
months  ended  April  30,  1998.  The  increase  in other income (expense), net,
during  the  three  months  ended  April 30, 1999 was due primarily to increased
interest  costs  and  lower  interest income on a note from the president of the
Company  and  a  related party which, beginning in fiscal 1999, will be recorded
only  when  cash  is  actually  received.

     Income tax.  Due to the availability of net operating loss carryforwards at
July  31,  1998  and  1997  of $8.8 million and $5.3 million, net income for the
three months ended April 30, 1999 did not result in any income tax expense.  Due
to  the  net loss for the three months ended April 30, 1998, there was no income
tax  expense.  The  ability  to  utilize  such net operating loss carryforwards,
which  expire  in  the  years  2009 to 2013, may be significantly limited by the
application of the "change of ownership" rules under Section 382 of the Internal
Revenue  Code.

                                       20
<PAGE>
NINE  MONTHS  ENDED APRIL 30, 1999 COMPARED WITH THE NINE MONTHS ENDED APRIL 30,
1998

     Revenues.  Revenues  for  the  nine  months ended April 30, 1999 were $23.7
million  compared with $24.2 million for the nine months ended April 30, 1998, a
decrease  of  $524,362 or 2.2%.  This decrease was attributable to a decrease in
average  sales price for LPG during the nine months ended April 30, 1999 of $5.7
million,  partially  offset  by  increased  volumes  of LPG sold during the nine
months  ended April 30, 1999, resulting in an increase in sales of $5.5 million.

     Cost  of sales.  Cost of sales for the nine months ended April 30, 1999 was
$21.3  million  compared  with $22.3 million for the nine months ended April 30,
1998,  a  decrease of $1.0 million or 4.7%.  This decrease was attributable to a
decrease  in  average  purchase  price  for LPG purchased during the nine months
ended  April  30,  1999 of $5.6 million, offset by the increase in volume of LPG
sold  during  the  nine months ended April 30, 1999, resulting in an increase in
cost  of  goods  sold  of  $4.6  million.

     Selling,  general  and  administrative  expenses.  Selling,  general  and
administrative  expenses  were  $1.7 million for the nine months ended April 30,
1999  compared  with  $1.5  million for the nine months ended April 30, 1998, an
increase  of  $241,105  or  16.0%.  This  increase was primarily attributable to
payroll,  legal  and  other  costs.

     Other  income  and expenses, net.  Other income (expense), net was $561,828
for  the  nine  months ended April 30, 1999 compared with ($83,808) for the nine
months  ended  April  30,  1998.  The  increase  in other income (expense), net,
during  the nine months ended April 30, 1999 was due primarily to the award from
litigation  of  $987,114, partially offset by increased interest costs and lower
interest  income on a note from the president of the Company and a related party
which,  beginning  in  fiscal  1999, will be recorded only when cash is actually
received.

     Income  tax.  Due  to  the availability of net operating loss carryforwards
($8.8  million  and  $5.3 million at July 31, 1998 and 1997), net income for the
nine  months  ended  April  30,  1999  and 1998 did not result in any income tax
expense.  The  ability  to  utilize such net operating loss carryforwards, which
expire  in  the  years  2009  to  2013,  may  be  significantly  limited  by the
application of the "change of ownership" rules under Section 382 of the Internal
Revenue  Code.

     Historically,  the  Company  has  received the majority of its total annual
revenues  during  the  months  of  October  through  March.  Such  pattern  is
attributable  to the seasonal demand for LPG, which is typically greatest during
the winter months of the second and third quarters of the Company's fiscal year.
The Company's quarterly earnings may vary considerably due to the impact of such
seasonality.

LIQUIDITY  AND  CAPITAL  RESOURCES

     General.  The Company has had an accumulated deficit since its inception in
1992,  has  used  cash in operations and has a deficit in working capital and is
delinquent under certain loan and lease agreements.  In addition, the Company is
involved in litigation, the outcome of which cannot be determined at the present
time.  The  Company  depends  heavily  on  sales  to  one  major  customer.  The
Company's  sources  of  liquidity  and  capital resources historically have been
provided  by  sales of LPG and CNG-related equipment, proceeds from the issuance
of  short-term  and  long-term  debt,  revolving  credit  facilities  and credit
arrangements,  sale or issuance of preferred and common stock of the Company and
proceeds  from  the  exercise  of  warrants  to purchase shares of the Company's
common  stock.

                                       21
<PAGE>
     The  following  summary  table reflects comparative cash flows for the nine
months  ended  April  30,  1999  and  1998.  All  information  is  in thousands.

<TABLE>
<CAPTION>
                                                          Nine months Ended
                                                     ----------------------------
                                                      April 30,      April 30,
                                                         1999           1998
                                                     ------------  --------------
<S>                                                  <C>           <C>
Net cash provided by (used in) operating activities  $   743,387   $  (  723,409)
Net cash (used in) investing
 activities . . . . . . . . . . . . . . . . . . . .   (  337,475)   (  1,117,798)
Net cash provided by financing activities . . . . .      112,379       2,078,728
                                                     ------------  --------------
Net increase in cash. . . . . . . . . . . . . . . .  $   518,291   $     237,521
                                                     ============  ==============
</TABLE>

     The  PMI  Sales  Agreement is effective for the period from October 1, 1998
through  September  30,  1999  and  provides  for the purchase by PMI of minimum
monthly  volumes  of  LPG  aggregating  a  minimum annual volume of 69.0 million
gallons,  similar  to  minimum  volume  requirements  under  the  previous sales
agreement with PMI effective during the period from October 1, 1997 to September
30,  1998.  During  October  1998,  the  Company  entered  into a monthly supply
agreement with Exxon pursuant to which Exxon agreed to supply minimum volumes of
LPG  to  the  Company.  Effective  November  1, 1998, the Company entered into a
supply  agreement  with Exxon to purchase minimum monthly volumes of LPG through
September 1999.  The Company believes it has access to an adequate supply of LPG
from  Exxon and other suppliers to satisfy the requirements of PMI under the PMI
Sales  Agreement.  In  determining  whether  any  supplier will be utilized, the
Company  will  consider  the applicable prices charged as well as any additional
fees  that  may  be  required  to  be  paid under the Pipeline Lease.  Beginning
October  1998,  the Company anticipates 10% - 15% lower gross margins on its LPG
sales  as a result of increased LPG costs compared with the previous agreements.

     Pipeline  Lease.  The  Pipeline  Lease currently expires on March 31, 2013,
pursuant  to  an  amendment entered into between the Company and Seadrift on May
21,  1997,  effective  on  April  1, 1998 (the "Pipeline Lease Amendment").  The
Pipeline  Lease  Amendment  provides, among other things, for additional storage
access  and  inter-connection  with  another  pipeline  controlled  by Seadrift,
thereby  providing  greater  access  to  and from the Pipeline.  Pursuant to the
Pipeline Lease Amendment, the Company's fixed annual fee associated with the use
of  the  Pipeline  was  increased  by  $350,000. In addition, the Pipeline Lease
Amendment  provides  for  variable  rental  increases  based  on monthly volumes
purchased  and  flowing into the Pipeline.  Beginning February 1, 1999, Seadrift
began  invoicing  the  Company as prescribed under the Pipeline Lease Amendment.
The  Company  believes  the  extension  of  the Pipeline Lease gives the Company
increased  flexibility  in  negotiating  sales  and  supply  agreements with its
customers  and suppliers.  During November 1998, the Company issued a promissory
note  to  Seadrift for $261,206, representing all outstanding rental obligations
owed  to Seadrift through November 1998.  The promissory note was payable in six
installments  beginning November 25, 1998 and ending February 3, 1999.  Interest
on  the  promissory  note  was  10%  per  annum.  The  Company made all payments
required  under  the  promissory  note.

     Credit Arrangements.  In connection with the PMI Sales Agreement, invoicing
is  to occur weekly.  From November 1996 to early November 1997, the Company and
PMI  made  an  arrangement  under  which PMI provided financing on the Company's
behalf  under  the  terms  of  the  Company's  supply  agreement with Exxon, the
Company's main supplier.  As a result of this arrangement, invoicing occurred on
a  monthly,  rather  than  a  weekly  basis.

                                       22
<PAGE>
     On  October  22,  1997,  the  Company  entered  into  a $6.0 million credit
facility  with  RZB Finance L.L.C. (RZB) for demand loans and standby letters of
credit  (RZB  Credit  Facility) to finance the Company's purchase of LPG.  Under
the  RZB  Credit Facility, the Company pays a fee with respect to each letter of
credit  thereunder  in  an amount equal to the greater of (i) $500, (ii) 1.5% of
the maximum face amount of such letter of credit, or (iii) such higher amount as
may be agreed to between the Company and RZB.  Any amounts outstanding under the
RZB  Credit Facility shall accrue interest at a rate equal to the rate announced
by  the  Chase  Manhattan Bank as its prime rate plus 2.5%.  Pursuant to the RZB
Credit  Facility,  RZB  has  sole  and  absolute discretion to terminate the RZB
Credit  Facility  and to make any loan or issue any letter of credit thereunder.
RZB  also  has  the  right  to demand payment of any and all amounts outstanding
under  the  RZB  Credit Facility at any time.  In connection with the RZB Credit
Facility,  the  Company  granted a mortgage, security interest and assignment in
any  and  all of the Company's real property, buildings, pipelines, fixtures and
interests  therein or relating thereto, including, without limitation, the lease
with the Brownsville Navigation District of Cameron County for the land on which
the  Company's Brownsville Terminal Facility is located, the Pipeline Lease, and
in  connection therewith agreed to enter into leasehold deeds of trust, security
agreements,  financing statements and assignments of rent, in forms satisfactory
to  RZB.  Under the RZB Credit Facility, the Company may not permit to exist any
lien,  security interest, mortgage, charge or other encumbrance of any nature on
any  of its properties or assets, except in favor of RZB, without the consent of
RZB.  The  Company's  President,  Chairman  and  Chief  Executive  Officer  has
personally  guaranteed  all of the Company's payment obligations with respect to
the  RZB  Credit  Facility.  Upon  establishment  of  the  RZB  Credit Facility,
beginning  November  11, 1997, PMI no longer provided any financing on behalf of
the  Company,  and  the  Company  began  invoicing  PMI  on  a  weekly  basis.

     Effective  April  22,  1998,  the  aggregate amount available under the RZB
Credit  Facility was increased to $7.0 million.  The Company believes that based
on  current market prices of LPG and LPG volume requirements under the PMI Sales
Agreement,  the  RZB  Credit  Facility  is  adequate.   In January 1999, the fee
charged for letters of credit issued under the RZB Credit Facility was increased
to  2.5%.

     In  connection  with  the Company's purchases of LPG from Exxon and/or PG&E
NGL  Marketing,  L.P.(PG&E),  the  Company issues letters of credit on a monthly
basis  based  on  anticipated  purchases.

     As  of  April  30,  1999,  letters  of  credit  established  under  the RZB
Credit  Facility  in  favor  of Exxon and PG&E for purchases of LPG totaled $6.0
million  and  $335,000  of  which  $1.9  million and $341,811 were being used to
secure  unpaid purchases from Exxon and PG&E as of April 30, 1999. In connection
with  these purchases, as of April 30, 1999, the Company had unpaid invoices due
from  PMI  totaling  $1.8 million and cash balances maintained in the RZB Credit
Facility  collateral  account  of  $717,816.

     Private  Placements  and  Other  Transactions.     On October 21, 1997, the
Company  completed  a  private  placement pursuant to which it issued promissory
notes in the aggregate principal amount of $1.5 million and warrants to purchase
250,000 shares of common stock exercisable until October 21, 2000 at an exercise
price  of  $6.00 per share.  The notes were unsecured.  Proceeds raised from the
private  placement  totaled  $1.5  million,  which  the Company used for working
capital  requirements.  Interest at 10% per annum was due quarterly on March 31,
June  30,  September  30  and December 31.  Payment of the principal and accrued
interest on the promissory notes was due on June 30, 1998.  On December 1, 1998,
the  Company completed a rollover and assignment agreement effectively extending
the  due  date  of  the  promissory  notes  until  June  30, 1999 (the "Rollover
Agreement").  In  connection  with the Rollover Agreement, the Company agreed to
assign its rights to any net cash collected from the Judgment towards any unpaid
principal  and  interest owing on the promissory notes.  The Company also agreed
to use any net proceeds received by the Company from any public offering of debt
or equity of the Company in excess of $2.3 million, towards the repayment of any
balances  owing  under  the  promissory notes.  The promissory note holders also
received  additional  warrants  to  purchase  337,500  shares  of  common stock,
exercisable  until  November  30, 2001, at an exercise price of $1.75 per share.
The  purchasers  in  the  private placement were granted one demand registration
right  with  respect  to  the  shares  issuable  upon  exercise of the warrants.

     On  March 3, 1999, the Company completed an exchange of $0.9 million of the
promissory  notes for 90,000 shares of the Company's Senior Preferred Stock (the
Senior  Preferred  Stock)  at  a  purchase price of $10.00 per share. The Senior
Preferred  Stock  is  non-voting  and  dividends  are  payable  at a rate of 12%

                                       23
<PAGE>
annually, payable in cash or in kind, semi-annually.  The Senior Preferred Stock
may  be  converted  in whole or in part at any time at a conversion ratio of one
share  of  Senior Preferred Stock for 4.0 shares of common stock of the Company.
In  connection  with  the  exchange,  the  holder  of the Senior Preferred Stock
received  50,000  shares  of  common  stock  of  the  Company and may receive an
additional 50,000 shares of common stock of the Company, if the Senior Preferred
Stock  is  not  redeemed by the Company prior to September 3, 1999.  The Company
has  granted  one  demand registration right with respect to any common stock of
the  Company  which  may be acquired and/or received by the holder of the Senior
Preferred  Stock in connection with the transaction.  The Company and the holder
of  the  Senior  Preferred  Stock  have  agreed  to  share  the  costs  of  the
registration.

     On  November 13, 1998, the Company issued 250,000 shares of common stock of
the  Company  and  warrants  to  purchase  75,000 shares of common stock with an
exercise  price of $1.25 per warrant and an expiration date of November 12, 2000
for  an  amount  of  $250,000.  Net proceeds from the sale were used for working
capital  purposes.

     On  December 14, 1998, the Company issued 500,000 shares of common stock of
the  Company  and  warrants  to  purchase 300,000 shares of common stock with an
exercise  price of $1.75 per warrant and an expiration date of December 13, 2003
for  an  amount  of  $500,000.  Net proceeds from the sale were used for working
capital  purposes.

     During  December  1998, the Company issued 53,884 shares of common stock of
the  Company  to  Zimmerman  Holdings  Inc.  (ZHI),  as  payment  for  and  full
cancellation  of  a  note  payable  of  $100,000  and related interest and other
obligations  totaling  $18,000 and the cancellation of any further obligation to
pay  any  future  royalties in connection with Company's purchase of certain CNG
assets  from  Wilson  Technologies  Inc.,  a  wholly  owned  subsidiary  of ZHI.

     During  December, 1998, the Company issued 15,000 shares of common stock of
the  Company  and  warrants  to  purchase  10,000 shares of common stock with an
exercise  price of $3.25 per warrant and an expiration date of December 31, 2000
in  exchange  for  cancellation  of  all  outstanding  obligations  totaling
approximately  $26,000 and other obligations as outlined in an agreement between
the  parties.

     On March 18, 1999, the Company issued 120,000 shares of common stock of the
Company  and warrants to purchase 60,000 shares of common stock with an exercise
price  of  $2.25  per  warrant  and  an expiration date of March 18, 2002 for an
amount  of  $150,000.  Net  proceeds from the sale were used for working capital
purposes.

     On  March 19, 1999, the Company issued 60,106 shares of common stock of the
Company  and warrants to purchase 30,303 shares of common stock with an exercise
price  of  $2.59  per  warrant  and  an expiration date of March 19, 2002 for an
amount  of  $100,000.  Net  proceeds from the sale were used for working capital
purposes.

     On March 19, 1999, the Company issued 146,667 shares of common stock of the
Company  and warrants to purchase 73,333 shares of common stock with an exercise
price  of  $2.42  per  warrant  and  an expiration date of March 19, 2002 for an
amount  of  $220,000.  Net  proceeds from the sale were used for working capital
purposes.

     In  connection with the stock issuances in March 1999, the Company issued a
total  of  35,000  shares  of common stock of the Company, representing the fees
associated  with  the  transactions.

     During  May  1999,  the  Company  entered  into  separate  settlement
agreements with a legal firm and a supplier (the "Creditors") in connection with
prior  services  performed for the Company.  Under the terms of the settlements,
the  Company  has  agreed  to  make  specified payments totaling $550,000 to the
Creditors.  At  the  time  of  the  settlements,  the  Company had approximately
$614,000  of accrued liabilities recorded in connection with amounts owed to the
Creditors.  In  connection  with  the settlements, the Company has agreed in the
future to provide a "Stipulation of Judgment" to the Creditors in the event that
the  Company  defaults  under  the  settlement  agreements.

     Judgment  in  favor of the Company.  Judgment has been rendered in favor of
the  Company in connection with its litigation against IBC-Brownsville.  On June
10,  1999,  IBC-Brownsville  was  denied its petition for review by the  Supreme
Count  of  Texas.  As  of  April  30,  1999,  the  net  amount  of  the award is
approximately  $3.7  million,  which is comprised of the sum of (i) the original

                                       24
<PAGE>
award,  including  attorney's  fees,  (ii)  post-award  interest,  and  (iii)
cancellation  of  the  note  and accrued interest payable, less attorneys' fees.
Although no assurance can be made that IBC-Brownsville will not continue to seek
other  legal remedies against the Judgment, management believes that the Company
will  ultimately  prevail, and will receive the proceeds from such Judgment.  In
addition,  a former officer of the Company is entitled to 5% of the net proceeds
(after  expenses  and  legal  fees).  The  remaining proceeds available from the
Judgment  have been assigned to the promissory note holders to the extent of any
amounts  then  owing  under  the  promissory notes.  See notes G, I and L to the
Consolidated  Financial  Statements.

     Realization  of  Assets.  Recoverability of a major portion of the recorded
asset amounts on the Company's balance sheet is dependent upon the collection of
the  Judgment, the Company's ability to obtain additional financing and to raise
additional  equity  capital, and the success of the Company's future operations.

     To  provide  the Company with the ability it believes necessary to continue
in  existence,  management  is  taking  steps  to (i) collect the Judgment, (ii)
increase  sales to its current customers, (iii) increase its customer base, (iv)
extend the terms and capacity of the Pipeline Lease and the Brownsville Terminal
Facility,  (v)  expand  its  product lines and (vi) raise additional debt and/or
equity  capital.  See  note  J  to  the  Consolidated  Financial  Statements.

     Year 2000 Date Conversion.  Management has determined that the consequences
of  its  Year  2000  issues  will  not  have  a material effect on the Company's
business,  results  of  operations,  or  financial  condition.

FINANCIAL  ACCOUNTING  STANDARDS

     In February 1997, the Financial Accounting Standards Board issued Statement
of  Financial Accounting Standards No. 128 (SFAS 128), Earnings per Share.  SFAS
128  supersedes  APB  Opinion  No.  15 (Opinion No. 15), Earnings per Share, and
requires the calculation and dual presentation of basic and diluted earnings per
share (EPS), replacing the measures of primary and fully-diluted EPS as reported
under Opinion No. 15.  SFAS 128 became effective for financial statements issued
for  periods  ending  after  December  15,  1997;  earlier  application  was not
permitted.  Accordingly,  EPS  for  the  periods  presented  in the accompanying
consolidated  statements of operations are calculated under the guidance of SFAS
128.

     In  June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  130  (SFAS  130), Reporting Comprehensive
Income  and  Statement  of  Financial  Accounting  Standards No. 131 (SFAS 131),
Disclosure  about  Segments  of an Enterprise and Related Information.  Both are
effective  for  periods  beginning  after  December  15,  1997,  with  earlier
application  encouraged  for  SFAS  131.  The Company adopted SFAS 131 in fiscal
1997.

                                       25
<PAGE>
PART  II

ITEM  1.     LEGAL  PROCEEDINGS

See  Note I to the unaudited Consolidated Financial Statements and Note O to the
Company's  Annual  Report  on  Form  10-K  for  the  year  ended  July 31, 1998.

ITEM  2.     CHANGES  IN  SECURITIES

     None.

ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES

     None.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITIES  HOLDERS.

     None.

ITEM  5.     OTHER  INFORMATION

     None.

ITEM  6.     EXHIBITS,  FINANCIAL  STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.


The  following  Exhibits  are  incorporated  herein  by  reference:

<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C>          <S>
      10.71  LPG Mix Purchase Contract dated September 28, 1998 between P.M.I. Trading Limited and the Company.
             (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended July 31, 1998
             filed on November 13, 1998, SEC File No. 000-24394).

      10.72  LPG Sales Agreement dated November 16, 1998 between Exxon and the Company.  (Incorporated by reference
             to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998 filed on
             December 18, 1998, SEC File No. 000-24394).

      10.73  Rollover and Assignment Agreement dated December 1, 1998 among Castle Energy Corporation, Clint Norton,
             Southwest Concept, Inc., James F. Meara, Jr., Donaldson Luftkin Jenrette Securities Corporation Custodian SEP
             FBO James F. Meara IRA, Lincoln Trust Company FBO Perry D. Snavely IRA and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.74  Registration Rights Agreement dated December 1, 1998 among Castle Energy Corporation, Clint Norton,
             Southwest Concept, Inc., James F. Meara, Jr., Donaldson Luftkin Jenrette Securities Corporation Custodian SEP
             FBO James F. Meara IRA, Lincoln Trust Company FBO Perry D. Snavely IRA and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.75  Collateral Agreement dated December 1, 1998 among Castle Energy Corporation, Clint Norton, Southwest
             Concept, Inc., James F. Meara, Jr., Donaldson Luftkin Jenrette Securities Corporation Custodian SEP FBO
             James F. Meara IRA, Lincoln Trust Company FBO Perry D. Snavely IRA and the Company. (Incorporated by
             reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998
             filed on December 18, 1998, SEC File No. 000-24394).

                                       26
<PAGE>
      10.76  Assignment of Judgment Agreement dated December 1, 1998 among Castle Energy Corporation, Clint Norton,
             Southwest Concept, Inc., James F. Meara, Jr., Donaldson Luftkin Jenrette Securities Corporation Custodian SEP
             FBO James F. Meara IRA, Lincoln Trust Company FBO Perry D. Snavely IRA and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.77  Amended Promissory Note dated December 1, 1998 between Castle Energy Corporation and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.78  Common Stock Purchase Warrant dated December 1, 1998 issued to Castle Energy Corporation by the
             Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period
             ended October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.79  Amended Promissory Note dated December 1, 1998 between Clint Norton and the Company. (Incorporated by
             reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998
             filed on December 18, 1998, SEC File No. 000-24394).

      10.80  Common Stock Purchase Warrant dated December 1, 1998 issued to Clint Norton by the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.81  Amended Promissory Note dated December 1, 1998 between Southwest Concept, Inc. and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.82  Common Stock Purchase Warrant dated December 1, 1998 issued to Southwest Concept, Inc. by the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.83  Amended Promissory Note dated December 1, 1998 between James F. Meara, Jr. and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.84  Common Stock Purchase Warrant dated December 1, 1998 issued to James F. Meara, Jr. by the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.85  Amended Promissory Note dated December 1, 1998 between Donaldson Luftkin Jenrette Securities Corporation
             Custodian SEP FBO James F. Meara IRA and the Company. (Incorporated by reference to the Company's
             Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998 filed on December 18, 1998,
             SEC File No. 000-24394).

      10.86  Common Stock Purchase Warrant dated December 1, 1998 issued to Donaldson Luftkin Jenrette Securities
             Corporation Custodian SEP FBO James F. Meara IRA and the Company. (Incorporated by reference to the
             Company's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998 filed on December
             18, 1998, SEC File No. 000-24394).

                                       27
<PAGE>
      10.87  Amended Promissory Note dated December 1, 1998 between Lincoln Trust Company FBO Perry D. Snavely
             IRA and the Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the
             quarterly period ended October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.88  Common Stock Purchase Warrant dated December 1, 1998 issued to Lincoln Trust Company FBO Perry D.
             Snavely IRA by the Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
             the quarterly period ended October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.89  Purchase Agreement dated November 13, 1998 between Van Moer Santerre & Company and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.90  Registration Rights Agreement dated November 13, 1998 between Van Moer Santerre & Company and the
             Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period
             ended October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.91  Common Stock Purchase Warrant dated November 13, 1998 issued to Van Moer Santerre & Company by the
             Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period
             ended October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.92  Purchase Agreement dated December 14, 1998 between KFP Grand LTD. and the Company. (Incorporated by
             reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998
             filed on December 18, 1998, SEC File No. 000-24394).

      10.93  Registration Rights Agreement dated December 14, 1998 between KFP Grand LTD. and the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.94  Common Stock Purchase Warrant dated December 14, 1998 issued to KFP Grand LTD. by the Company.
             (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
             October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

      10.95  Second Amendment of the Interim Operating Agreement dated December 15, 1998 among Wilson
             Technologies Inc., Zimmerman Holdings, Inc. and the Company. (Incorporated by reference to the Company's
             Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998 filed on December 18, 1998,
             SEC File No. 000-24394).
</TABLE>

The  following  material  contracts  are  filed  as  part  of  this  report:

<TABLE>
<CAPTION>
<C>     <S>
 10.96  Purchase Agreement dated March 18, 1999 between Van Moer Santerre & Company and the Company.

 10.97  Registration Rights Agreement dated March 18, 1999 between Van Moer Santerre & Company and the
        Company.

 10.98  Common Stock Purchase Warrant dated March 18, 1999 issued to Van Moer Santerre & Company by the
        Company.

 10.99  Purchase Agreement dated March 19, 1999 between Steve Payne and the Company.

10.100  Registration Rights Agreement dated March 19, 1999 between Steve Payne and the Company.

10.101  Common Stock Purchase Warrant dated March 19, 1999 issued to Steve Payne by the Company.

10.102  Purchase Agreement dated March 19,1999 between Igor Kent and the Company.

                                       28
<PAGE>
10.103  Registration Rights Agreement dated March 19,1999 between Igor Kent and the Company.

10.104  Common Stock Purchase Warrant dated March 19,1999 issued to Igor Kent by the Company.

  27.1  Financial Data Schedule.  (Filed herewith.)
</TABLE>

b.     Reports  on  Form  8-K.

The  following  Reports  on  Form  8-K  are  incorporated  herein  by reference:

Company's  Current  Report  on  Form 8-K filed on February 9, 1999 regarding the
Company's  realization  of  the  IBC-Brownsville  award.

Company's  Current  Report  on  Form  8-K  filed  on March 4, 1999 regarding the
Company's  exchange of $.9 million of indebtedness for Senior Preferred Stock of
the  Company.

Company's  Current  Report  on  Form  8-K  filed  on  June 1, 1999 regarding the
Company's  sale  of  the  CNG  assets.

                                       29
<PAGE>
                                   SIGNATURES

Pursuant  to  the  requirements  of the Securities and Exchange Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned,  thereunto  duly  authorized.


                             PENN OCTANE CORPORATION


June 14, 1999                By: /s/ Ian T. Bothwell
                                 --------------------
                                 Ian T. Bothwell
                                 Vice President, Treasurer, Assistant Secretary,
                                 Chief  Financial  Officer

                                       30
<PAGE>