EMPLOYMENT AGREEMENT
                                JERRY L. LOCKETT


     This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
                                      ---------
November  17,  1997  (the  "Effective  Date"),  by  and  between  PENN  OCTANE
                            ---------------
CORPORATION, a Delaware corporation (the "Company") or the "Employer") and Jerry
                                          -------           --------
L.  Lockett  (the  "Officer"),  with  reference  to  the  following:

                                    RECITALS

     Employer desires to employ the Officer as Vice President of the Company and
the Officer is willing to accept such employment by the Company on the terms and
subject  to  the  conditions  set  forth  in  this  Agreement.

                                    AGREEMENT

     1.     EMPLOYMENT,  AUTHORITY  AND  DUTIES.

          1.1     EMPLOYMENT.  During  the  term  of this Agreement, the Officer
agrees  to  be  employed by and to serve as a Vice President of the Company, and
the  Company  agrees  to  employ  and  retain  the  Officer  in  such  capacity.

1.2     POSITION.  The  Officer  shall  serve  as  a  Vice  President  of
the  Company  and will be responsible for the marketing and purchasing of liquid
gases.

          1.3     PLACE  OF  EMPLOYMENT;  WORKING  FACILITIES.  The  Officer's
principal  place  of  business  with  respect  to  his  services to the Employer
initially  shall  be  located in Houston, TX.  Employer will provide the Officer
with  an  office  and such other facilities and equipment at such location as is
suitable  to  the  Officer's  position  and necessary for the performance of his
duties.

     2.     TERMS  OF  EMPLOYMENT.

          2.1     DEFINITIONS.  For  purposes  of  this Agreement, the following
terms  shall  have  the  following  meanings:

               (a)     "Termination  for  Cause"  shall  mean  termination  by
                        -----------------------
Employer  of  the  Officer's employment hereunder by reason of (i) the Officer's
willful  and  continued  failure  to  substantially perform his duties hereunder
(other  than  any  such  failure  resulting from the Officer's incapacity due to
physical  or  mental  illness),  (ii)  the  Officer's  act  or  acts of personal
dishonesty  or  moral  turpitude, (iii) the Officer's conviction of a felony, or
(iv)  the  Officer's  willful  breach of a material provision of this Agreement.
For  purposes of this Agreement, no act or failure to act, on the Officer's part
will  be considered "willful" unless done, or omitted to be done, by the Officer
in  bad  faith  without reasonable belief that such actions or omissions were in
the  best  interest  of  Employer.

               (b)     "Termination  for Good Reason" shall mean the election of
                        ----------------------------
the  Officer  to terminate his employment hereunder following a determination in
good  faith  by  the  Officer  that  any of the following has occurred:  (i) the
assignment  of  the  Officer  to  any  duties  or  position which results in any
diminution  of  the  Officer's  authority, duties or responsibilities under this
Agreement,  as  determined in good faith by the Officer, (ii) failure to pay any
or  all  of  Officer's Base Salary or other benefits under this Agreement, (iii)
the  transfer  or  forced  relocation  of the principal place of business of the
officer  to any geographic location outside the Houston, Texas area, or (iv) the
breach  or  assertion of the invalidity or unenforceability of this Agreement or
any  provision  thereof by Employer or a Successor Entity (as defined in Section
7.7).

               (c)     "Termination  Without  Cause"  shall  mean termination by
                        ---------------------------
Employer  of  the  Officer's  employment  hereunder other than pursuant to (i) a
Termination  for Cause, (ii) a termination by reason of the Officer's disability
(as described in Section 2.5), or (iii) a termination by reason of the Officer's
death  (as  described  in  Section  2.6).

               (d)     "Voluntary  Termination"  shall mean a termination by the
                        ----------------------
Officer  of  the Officer's employment hereunder, other than (i) a termination by
reason  of  the  Officer's  disability  (as  described  in  Section 2.5), (ii) a
termination  by  reason of the Officer's death (as described in Section 2.6), or
(iii)  a  Termination  for  Good  Reason.

          2.2     TERM  OF EMPLOYMENT.  The term of employment of the Officer by
Employer  hereunder  shall  be  from  November  17,  1997 (the "Effective Date")
                                                                --------------
through  November  30,  1998,  unless  the  Officer's  employment  hereunder  is
terminated  earlier  pursuant  to this Agreement.  Upon expiration of the stated
term  of  the  Agreement on November 30, 1998, this Agreement shall continue for
another  year  until terminated in accordance with its terms, unless notified by
either  party  sixty  (60)  days  in  advance.

          2.3     TERMINATION  FOR  CAUSE.  A  Termination  for  Cause  may  be
effected  by  Employer  at  any  time during the term of this Agreement.  Upon a
Termination for Cause, the Officer shall be paid all accrued salary and benefits
to the date of termination and any bonus compensation to the extent earned under
Section  3.2 and/or Section 3.3 and/or Section 3.4, but the Officer shall not be
paid  any  other  compensation  or reimbursement of any kind (including, without
limitation,  severance  compensation  pursuant  to Section 6) and all rights and
obligations hereunder shall terminate, except as specifically provided herein or
required  by  law.

          2.4     TERMINATION  WITHOUT  CAUSE.  Notwithstanding anything else in
this  Agreement,  Employer  shall have the right to effect a Termination without
Cause  at  any  time  during  the  term of this Agreement.  Upon any Termination
Without  Cause, the Officer shall be paid all accrued salary and benefits to the
date  of  termination, bonus compensation to the extent earned under Section 3.1
and/or  Section  3.2,  and  severance compensation as provided in Section 6, but
shall  be  paid  no  other  compensation  or reimbursement of any kind except as
modified  below, and all other rights and obligations hereunder shall terminate,
except  as specifically provided herein or required by law.  If such termination
without cause is effected by Employer at any time after may 17, 1998 (i.e. on or
after  the 6th month of employment), then Officer shall be entitled to the grant
of fifty thousand (50,000) of the Company's $5.00 Class E Warrants (the "Class E
Warrants")  as  specified  in  Article  5.

          2.5     TERMINATION  BY  REASON OF DISABILITY.  If, during the term of
the  Officer's  employment  by  the  Company, the Officer has been substantially
unable  to  perform  his duties under this Agreement on a full-time basis due to
illness  or  physical  or mental incapacity for thirty (30) consecutive calendar
days,  and  within thirty (30) days after notice to the Officer of the Company's
intention to terminate his employment by reason of such disability (which notice
may  only  be  given  after  the end of the initial thirty (30) day period), the
Officer  has  not  reasonably  demonstrated  the  ability  to perform his duties
hereunder  on  a full-time basis, Employer shall have the right to terminate the
Officer's  employment hereunder.  Upon any such termination the Officer shall be
paid  all accrued salary and benefits, including, without limitation, disability
benefits  payable  to  the  Officer  pursuant  to  the  terms  of  any long-term
disability  insurance  policy or program obtained by Employer for the benefit of
its  executives  and  bonus  compensation to the extent earned under Section 3.1
and/or  Section  3.2,  but  no  other  compensation or reimbursement of any kind
except as specified below (including, without limitation, severance compensation
pursuant to Section 6) and all rights and obligations hereunder shall terminate,
except  as specifically provided herein or required by law.  If such Termination
by  reason  of Disability is effected by Employer at any time after May 17, 1998
(i.e.  on  or after the 6th month of employment), then Officer shall be entitled
to  the grant of fifty thousand (50,000) of the Company's $5.00 Class E Warrants
(the  "Class  E  Warrants")  as  specified  in  Article  5.

          2.6     DEATH.  The  Officer's  employment  hereunder  shall terminate
upon the Officer's death and Employer shall pay to his estate all accrued salary
and benefits (including, without limitation, any life insurance benefits) to the
date  of  termination  and bonus compensation to the extent earned under Section
3.1  and/or Section 3.2, but no other compensation or reimbursement of any kind,
including, without limitation, severance compensation pursuant to Section 6, and
all  other  rights  and  obligations  hereunder  shall  terminate,  except  as
specifically  provided  herein or required by law.  If such Termination by Death
is effected by Employer at any time after May 17, 1998 (i.e. on or after the 6th
month  of  employment),  then Officer's Estate shall be entitled to the grant of
fifty  thousand  (50,000)  of the Company's $5.00 Class E Warrants (the "Class E
Warrants")  as  specified  in  Article  5.

          2.7     VOLUNTARY  TERMINATION.  A  Voluntary  Termination  may  be
effected  by  the Officer during the term of this Agreement upon sixty (60) days
prior  written notice to Employer.  In the event of a Voluntary Termination, the
Officer shall immediately be paid all accrued salary and benefits to the date of
termination and bonus compensation to the extent earned under Section 3.1 and/or
Section  3.2, but no other compensation or reimbursement of any kind (including,
without  limitation, severance compensation pursuant to Section 6) and all other
rights  and  obligations  hereunder  shall  terminate,  except  as  specifically
provided  herein  or  required  by  law.

          2.8     TERMINATION  FOR  GOOD  REASON.  Upon any Termination for Good
Reason, the Officer shall be paid all accrued salary and benefits to the date of
termination,  bonus  compensation  to the extent earned under Section 3.1 and/or
Section  3.2  and  severance compensation as provided in Section 6, but shall be
paid  no  other  compensation or reimbursement of any kind, and all other rights
and  obligations  hereunder  shall  terminate,  except  as specifically provided
herein  or  required by law.  If such Termination for Good Reason is effected by
Employer  at  any  time after August 17, 1998 (i.e. on or after the 9th month of
employment),  then  Officer  shall  be  entitled  to the grant of fifty thousand
(50,000)  of  the  Company's  $5.00 Class E Warrants (the "Class E Warrants") as
specified  in  Article  5.

     3.     BASE  SALARY;  BONUSES.

          3.1     BASE  SALARY.  In consideration for the Officer's agreement to
be  employed  by  and serve the Company pursuant to the terms of this Agreement,
Employer  will  pay  the  Officer  a base salary (the "Base Salary") during each
                                                       -----------
calendar  year of One Hundred Twenty Thousand Hundred Dollars ($120,000) payable
bi-monthly,  in  accordance  with  Employer's  normal  payment  practices.  The
Officer's  Base  Salary  shall  be reviewed annually at the end of each calendar
year,  commencing  with  calendar  year 1997.  Further, an additional $1,000 pre
month  shall  be  paid  to  Officer  for  automobile  expenses  over  and  above
reimbursement of other expenses incurred by Officer as specified in Article 4.1.

3.2     INCENTIVE  BONUS.  The  Company  is  in  the  process  of
approving  the  performance  standards for the Company's incentive bonus program
and  the  Company  shall adopt such standards by no later than January 31, 1998.
The Officer shall participate in the Company's incentive bonus program and shall
be  eligible  to receive an incentive bonus each year which is equivalent to the
maximum  bonus  payable to any other senior executive officer of the Company for
such year.  The Officer shall be eligible to participate in any additional bonus
and incentive programs for which the Company may maintain or establish from time
to  time for the Company's executives, subject to and on a basis consistent with
the terms, conditions and overall administration of any such plan or arrangement
by  the  Company.
          3.3     VACATION PAY.  Officer shall be entitled to an annual vacation
leave  of  fifteen  (15)  business days at full pay.  The time for such vacation
shall  be selected by the Officer.  In lieu of the vacation leave specified, the
Officer  may  elect  to  receive  payment  for  the  whole or any portion of the
vacation time to which the Officer is entitled, such vacation timer to be valued
at  the  amount of the regular salary earned by the Officer during an equivalent
period  of  time.

          3.4     HOLIDAYS.  During  each  calendar  year,  the Officer shall be
entitled  to  a  holiday with full pay on the days designated by the corporation
set  out  above  as  being  paid  holidays.

          3.5     PAID  SICK  LEAVE.     The Officer shall be entitled to twelve
(12)  days  per  year  as  sick leave with full pay.  'Sick Leave" is defined as
short-term absences from employment that are necessary due to illness or injury.

     4.     BUSINESS  EXPENSE.

          4.1     GENERAL EXPENSES.  During the term of the Officer's employment
by  Employer,  the  Officer will be entitled to receive prompt reimbursement for
all  reasonable  expenses  incurred  by him (in accordance with the policies and
procedures  of  Employer  for  its  senior executive officers) in performing the
services  hereunder, including reasonable expenses for entertainment, travel and
similar  items, provided that the Officer properly accounts for such expenses in
accordance  with  the  policies  and  procedures  of  Employer.

          4.2     HEALTH  BENEFITS.  The Officer will be entitled to participate
in  or  receive benefits under any employee group health, medical, dental, life,
disability  and  any other similar benefit plan or arrangement which the Company
may  maintain  or  establish  from  time  to  time for the Company's executives,
subject  to  and  on  a  basis consistent with the terms, conditions and overall
administration  of  any such plan or arrangement by the Company and on terms and
conditions  at  least as favorable to the Officer as the terms and conditions to
which  each  of  the other senior executive officers of the Company are subject.
Nothing paid to the Officer under any such plan or arrangement will be deemed to
be  in lieu of the compensation otherwise payable to the Officer hereunder.  Any
payments  or  benefits payable to the officer with respect to a fiscal year will
be  prorated  based  on the number of days during the fiscal year the Officer is
actually  employed  by  Employer.

     5.     WARRANTS.  So long as this Agreement has not been earlier terminated
in  accordance  with  its  terms, except to the extent provided in Articles 2.4,
2.5, 2.6 and 2.8, Employer shall grant to the Officer Fifty Thousand (50,000) of
the  Company's  $5.00  Class  E Warrants on each of the first anniversary of the
effective date, i.e. 11/17/98, and an additional Fifty Thousand (50,000) Class E
Warrants  on  the  second anniversary of the effective date if this Agreement is
still in effect, at an exercise price per warrant equal to the average bid price
for  the  seven  day  trading  period  prior  to  such  anniversary.

     6.     SEVERANCE;  PAYMENTS.  Upon  the occurrence of a Termination Without
Cause or a Termination for Good Reason, in addition to any other amounts payable
to  the  Officer  hereunder, the Officer shall be paid severance compensation in
the  amount  of  three  (3)  months of Base Salary (measured by the monthly Base
Salary  in  effect  immediately  prior to such termination) plus all accrued but
unpaid  salary,  bonus  compensation  to the extent earned under Section 3.2 for
benefits  due  and  payable  to  the  Officer  on and as of the date of any such
termination.  Any  severance  compensation payable under this Section 6 shall be
payable  to  the Officer in immediately available funds within ten (10) business
days  of  any  Termination  Without Cause or Termination for Good Reason, as the
case  may  be.

     7.     MISCELLANEOUS.

          7.1     CONFIDENTIAL  INFORMATION.  The  Officer acknowledges that, in
the course of performing services on behalf of the Company, he may receive or be
privy to certain producer, end user or transporting pipeline client lists, trade
secrets,  programs,  lists of customers or trading accounts, business records or
audits  of  the  Company,  corporate  insider information, proprietary financing
structures  and  other  confidential  information  and  knowledge concerning the
business  of  the  Company,  its  corporate parent, stockholders or subsidiaries
(herein  collectively  referred  to as the "Confidential Information") which the
                                            ------------------------
Company  desires  to  protect.  The  Officer  understands  that the Confidential
Information  is  confidential and the Officer covenants and agrees not to reveal
the  Confidential  Information  to any person or entity, directly or indirectly,
outside  the  Company  so  long  as  the  confidential  or  secret nature of the
Confidential Information shall continue, unless the Officer is legally compelled
to  disclose  such Confidential Information.  The Officer further agrees that he
will  at no time use the Confidential Information in competing with the Company.
Upon  termination  of this Agreement, the Officer shall surrender to the Company
all  papers,  documents,  writings, and other property produced by him or in his
possession  by  or through his relationship with the Company (including computer
programs  or  information  derived from the Company's computer database) and the
Officer agrees that all such materials shall at all times remain the property of
the  Company.  This  Section  7.1  shall  be  inoperative as to any Confidential
Information  which (a) becomes generally available to the public on or after the
Effective  Date  hereof  other  than as a result of a disclosure in violation of
this  Section  7.1,  or  (b)  was available to the Officer on a non-confidential
basis  prior  to  its disclosure to the Officer, or (c) becomes available to the
Officer  on a non-confidential basis from a source other than the Company, which
source  is  not  itself  bound  by  a confidentiality obligation to the Company.

          7.2     WAIVER.  The  waiver  of  the  breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of  the  same  or  other  provision  thereof.

          7.3     ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided
herein,  this  Agreement  represents  the entire understanding among the parties
with respect to the subject matter hereof, and this Agreement supersedes any and
all  prior understandings, agreements and negotiations, whether written or oral,
with  respect  to  the subject matter hereof, including, without limitation, any
understandings,  agreements  or  obligations  respecting  any  past  or  future
compensation,  bonuses,  reimbursements  or  other  payments to the Officer from
Employer.  All  modifications  to the Agreement must be in writing and signed by
the  party  against  whom  enforcement  of  such  modification  is  sought.

          7.4     NOTICES.  All  notices  and  other  communications  under this
Agreement shall be in writing and shall be given by hand delivery or first class
mail,  certified  or registered with return receipt requested, to the respective
persons named below.  Each notice under this Section 7.4 shall be deemed to have
duly  given  upon  receipt or, if sent by first class mail, three (3) days after
mailing,  or  if sent by certified or registered mail, on the date of the return
receipt,  in  each  case,  to  the  address or telecopier number of the intended
recipient  set  forth  below:

If  to  the  Company:     Penn  Octane  Corporation
     900  Veterans  Boulevard
     Redwood  City,  California  94063
     Attention:  President

If  to  the  Officer:     Mr.  Jerry  L.  Lockett
     1635  Scenic  Shore  Drive
     Kingwood,  TX  77345

     Any  party may change such party's address for notices by notice duly given
pursuant  to  this  Section  7.4.

          7.5     HEADINGS.  The  Section  headings  herein  are  intended  for
reference  and  shall  not  by  themselves  determine  the  construction  or
interpretation  of  this  Agreement.

          7.6     SEVERABILITY.  Should  a  court  or  other  body  of competent
jurisdiction  determine  that  any  provision  of this Agreement is excessive in
scope  or  otherwise  invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum extent
possible,  and  all other provisions of this Agreement shall be deemed valid and
enforceable  to  the  fullest  extent  possible.

          7.7     SUCCESSORS  AND  ASSIGNS.  This  Agreement  shall  (a)  not be
assignable  either  by the Officer or by Employer, (b) be binding upon and inure
to  the  benefit  of  and  shall be enforceable by, the parties hereto and their
respective  successors  and permitted assigns, and (c) be binding upon and fully
enforceable  by  the Officer against any entity which succeeds to the Company by
merger,  consolidation,  reorganization, sale of all or substantially all of the
Company's assets or other similar transaction or series of transactions or which
acquires  substantially  all  of  the  assets  of the Company (any such entity a
"Successor  Entity").
     -------------

          7.8     WITHHOLDINGS.  All  compensation  and  benefits to the Officer
hereunder,  including,  without  limitation,  severance  compensation,  shall be
reduced  by  all  federal, state, local and other withholdings and similar taxes
and  payments  required  by  applicable  law.

          7.9     INDEMNIFICATION.  The  Officer  shall  be  entitled  to
indemnification  by  the  Company  to  the same extent that any other officer or
director  of  the  Company  is  entitled  to  indemnification  under the charter
documents  of  or  by  contract  with,  the  Company.

          7.10     COUNTERPARTS.  This  Agreement may be executed in one or more
counterparts,  each of which shall constitute an original and all of which taken
together  shall  constitute  one  and  the  same  Agreement.

          7.11     ATTORNEYS'  FEES.  In the event of litigation related to this
Agreement,  the  prevailing  party  will  be  entitled  to  recover  reasonable
attorneys'  fees  and  other  costs.

          7.12     GOVERNING LAW; CONSENT TO JURISDICTION.  this Agreement shall
be  governed  by  and  construed  in  accordance  with  the laws of the State of
California.  Each  party  to  this  Agreement  hereby  submits  to the exclusive
jurisdiction  and venue of the Superior Court of the State of California for the
County  of  San  Mateo  or  the  United  States  District Court for the Northern
District  of  California  for  purposes  of  any legal action which may arise in
connection  with this Agreement.  Each party agrees that service upon such party
in any such action may made by first class mail, certified or registered, in the
manner  provided  for  delivery  of  notices  in  Section  7.4.


<PAGE>
     IN  WITNESS  WHEREOF, the parties hereto have executed this Agreement as of
the  day  and  year  first  above  written.

EMPLOYER:                            PENN  OCTANE  CORPORATION

                                 By: /s/ J.B.  Richter
                                     ---------------------------
                                 Name:   J.B.  Richter
                                 Title:   President  &  CEO


OFFICER:                             /s/ Jerry L. Lockett
                                     ---------------------------
                                         Jerry L. Lockett