PROMISSORY NOTE

 PRINCIPAL   LOAN DATE   MATURITY   LOAN NO.:  CALL  COLLATERAL
$140,000.00  12-20-1996  9-30-1997  44117-71
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ACCOUNT          OFFICER          INITIALS
                   103
                   ---

  References in the shaded area are for Lender's use only and do not limit the
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        applicability of this document to any particular loan or item.
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Borrower:      Penn Octane Corporation               Lender:     Bay Area Bank
          900  Veterans  Blvd.  Suite  510                  900 Veterans Blvd.
          Redwood  City,  CA  94064                              P.O. Box 2579
                                                     Redwood  City,  CA  94064
_____________________
=====================

Principal  Amount:          $140,000                 Initial Rate:     11.250%
Date  of  Note:          December  20,  1996

PROMISE  TO  PAY.  PENN OCTANE CORPORATION ("Borrower") promises to pay to Bay
Area  Bank  ("Lender"),  or  order,  in  lawful  money of the United States of
America,  the  principal  amount  of  One  Hundred  Thousand  & 00/100 Dollars
($140,000.00),  together  with  interest  on the unpaid principal balance from
December  20,  1996,  until  paid  in  full.

PAYMENT.   Subject to any payment changes resulting from changes In the Index,
Borrower will pay this loan in accordance with the following payment schedule:

Line  to  be at a zero balance on the 25th each month.  Borrower will pay this
loan  on  demand,  or  if  not  demand  is  made,  in one principal payment of
$140,000.00  plus  interest on September 30, 1997.  This payment due September
30,  1997,  will  be  for all principal and accrued interest not yet paid.  In
addition,  Borrower  will  pay  regular payments of all accrued due as of each
payment  date,  beginning January 30, 1997, with all subsequent payments to be
due  on  the  same  day  of  each  month  after  that.

Interest on this Note is computed on a 365/365 simple interest basis; that is,
by applying the ratio of the annual interest rate over the number of days in a
year,  multiplied  by  the  actual  number  of  days  the principal balance is
outstanding.    Borrower will pay Lender at Lender's address shown above or at
such  other place as Lender may designate in writing.  Unless otherwise agreed
or  required  by  applicable law, payments will be applied first to any unpaid
collection  costs  and  any late charges, then to any unpaid interest, and any
remaining  amount  to  principal.

VARIABLE  INTERST  RATE.   The interest rate on this Note is subject to change
from  time  to  time  on  changes in an independent index which is the Rate as
listed in The Wall Street Journal "Money Rates" section, referred to as "Prime
Rate", (the "Index").  The Index is not necessarily the lowest rate charged by
Lender on its loans.  If the Index becomes unavailable during the term of this
loan,  Lender  may  designate  a  substitute  index  after notice to Borrower.
Lender  will  tell  Borrower  the  current Index rate upon Borrower's request.
Borrower  understands that Lender may make loans based on other rates as well.
The  interest  rate  change  will  not occur more often than each month and is
based  on  the  published rate in effect on the first business day each month.
If  more  than  one  Prime  Rate  is published, the prime rate chosen shall be
solely  at  Banks  option.    The  Index  currently  is 8.250% per annum.  The
interest  rate to be applied to the unpaid principal balance of this Note will
be at a rate of 3,000 percentage points over the Index, resulting in a current
rate  of 11.250% per annum.  NOTICE:  Under no circumstances will the interest
rate  on  this  Note  be more than the maximum rate allowed by applicable law.
Whenever  increases  occur in the interest rate, Lender, at its option, may do
one  or  more  of  the  following:  (a) increase Borrower's payments to ensure
Borrower's loan will pay off by its original final maturity date, (b) increase
Borrower's  payments  to  cover  accruing  interest,    increase the number of
Borrower's  payments,  and (d) continue Borrower's payments at the same amount
and  increase  Borrower's  final  payment.

PREPAYMENT.    Borrower  agrees  that  all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund  upon  early  payment  (whether  voluntary  or as a result of default),
except  as  otherwise required by law.  Except for the foregoing, Borrower may
pay  without  penalty  all  or a portion of the amount owed earlier than it is
due.   Early payments will not, unless agreed to by Lender in writing, relieve
Borrower  of  Borrower's  obligation  to  continue  to make payments under the
payment  schedule.  Rather, they will reduce the principal balance due and may
result  in  Borrower  making  fewer  payments.

LATE  CHARGE.   If a payment is 10 days or more late, Borrower will be charged
5.000%  of  the  regularly  scheduled payment or $25.00, whichever is greater.

DEFAULT.    Borrower  will  be in default if any of the following happens: (a)
Borrower  fails to make any payment when due.  (b) Borrower breaks any promise
Borrower  has  made  to Lender, or Borrower fails to comply with or to perform
when  due any other term, obligation, covenant, or condition contained in this
Note  or any agreement related tot his Note, or in any other agreement or loan
Borrower has with Lender.    Any representation or statement made or furnished
to  Lender  by  Borrower or on Borrower's behalf is false or misleading in any
material  respect  either  now or at the time made or furnished.  (d) Borrower
becomes  insolvent,  a  receiver  is  appointed  for  any  part  of Borrower's
property,  Borrower  makes  an assignment for the benefit of creditors, or any
preceding  is  commenced  either  by  Borrower  or  against Borrower under any
bankruptcy  or  insolvency  laws.    (e)    Any  creditor tries to take any of
Borrower's  property  on  or  in which Lender has a lien or security interest.
This  includes  a  garnishment  of any of Borrower's accounts with Lender. (e)
Any  creditor  tries  to take any of Borrower's property on or in which Lender
has  a  lien  or  security  interest.    This includes a garnishment of any of
Borrower's  accounts with Lender.  (f)  Any guarantee dies or any of the other
events  described in this default section occurs with respect to any guarantor
of  this  Note.  (g)  A material adverse change occurs in Borrower's financial
condition,  or  Lender  believes the prospect of payment or performance of the
Indebtedness  Is  impaired.  (h)   Lender in good faith deems itself insecure.

If  any  default,  other than a default in payment, is curable and if Borrower
has  not  been  given  a notice of a breach of the same provision of this Note
within  the  preceding  twelve  (12)  months, it may be cured (and no event of
default  will  have occurred) if Borrower, after receiving written notice from
Lender  demanding  cure  of such default: (a) cures the default within fifteen
(15)  days;  or  (b)  if  the  cure  requires  more  than  fifteen  (15) days,
immediately  initiates steps which Lender deems in Lender's sole discretion to
be  sufficient  to cure the default and thereafter continues and completes all
reasonable  and  necessary  steps  sufficient to produce compliance as soon as
reasonably  practical.

LENDER'S RIGHTS.  Upon default, Lender may declare the entire unpaid principal
balance  on this Note and all accrued unpaid interest immediately due, without
notice,  and  then  Borrower will pay that amount.  Upon Borrower's failure to
pay  all  amounts  declared due pursuant to this section, including failure to
pay  upon  final maturity, Lender, at its option, may also, if permitted under
applicable  law,  increase  due pursuant to this section, including failure to
pay  upon  final maturity, Lender, at its option, may also, if permitted under
applicable  law,  increase  the  variable  interest rate on this Note to 8,000
percentage  points over the Index.  This includes, subject to any limits under
applicable  law,  Lender's attorneys' fees and Lender's legal expenses whether
or  not  there  is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy  proceedings  (including  efforts to modify or vacate any automatic
stay  or  injunction),  appeals,  and any anticipated post-judgment collection
services.    Borrower  also will pay any court costs, in addition to all other
sums  provided by law.  THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER  IN  THE  STATE  OF CALIFORNIA.  IF THERE IS A LAWSUIT, BORROWER AGREES
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SAN MATEO
COUNTY, THE STATE OF CALIFORNIA.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN  ACCORDANCE  WITH  THE  LAWS  OF  THE  STATE  OF  CALIFORNIA.

DISHONORED  ITEM FEE.  Borrower will pay a fee to Lender of $12.00 if Borrower
makes  a payment on Borrower's loan and the check or preauthorized charge with
which  Borrower  pays  is  later  dishonored.

RIGHT  OF SETOFF.  Borrower grants to Lender a contractual possessory security
interest  in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with  Lender  (whether  checking,  savings,  or some other account), including
without  limitation  all  accounts  held  jointly  with  someone  else and all
accounts  Borrower may open in the future, excluding however all IRA and Keogh
accounts,  and  all  trust accounts for which the grant of a security interest
would  be  prohibited  by  law.    Borrower  authorizes  Lender, to the extent
permitted  by  applicable law, to charge or setoff all sums owing on this Note
against  any  and  all  such  accounts.

LINE  OF  CREDIT.    This Note evidences a revolving line of credit.  Advances
under  this  Note, as well as directions for payment from Borrower's accounts,
may  be requested orally or in writing by Borrower or by an authorized person.
Lender  may,  but  not,  require  that  all  requests be confirmed in writing.
Borrower  agrees  to be liable for all sums either: (a) advanced in accordance
with  the  instructions  of  an  authorized  person  or (b) credited to any of
Borrower's  accounts  with Lender.  The unpaid principal balance owing on this
Note  at any time may be evidenced by endorsements on this Note or by Lender's
internal  records,  including  daily computer print-outs.  Lender will have no
obligation  to advance funds under this Note if: (a) Borrower or any guarantor
is  in  default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection with
the  signing of this Note: (b) Borrower or any guarantor ceases doing business
or  is insolvent;   any guarantor applied funds provided pursuant to this Note
for  purchase to this Note for purposes other than those authorized by Lender;
(e)  Lender  in  good faith deems itself insecure under this Note or any other
agreement  between  Lender  and  Borrower.

GENERAL  PROVISIONS.    This  Note  is  payable  on  demand.  The inclusion of
specific  default  provisions  or rights of Lender shall not preclude Lender's
right  to  declare  payment  of  this Note on its demand.  Lender may delay or
forgo  enforcing  any of its rights or remedies under this Note without losing
them.    Borrower and any other person who signs, guarantees or endorsees this
Note,  to  the  extent  allowed  by  law,  waive  any  applicable  statute  of
limitations,  presentment, demand for payment, protest and notice of dishonor.
Upon  any  change  in  the  terms of this Note, and unless otherwise expressly
stated  in writing, no party who signs this Note, whether as maker, guarantor,
accommodation  maker  or endorser, shall be released from liability.  All such
parties  agree  that Lender may renew or extend (repeatedly and for any length
of  time)  this  loan,  or  release  any  party or guarantor or collateral; or
impair,  fall  to  realize  upon  or perfect Lender's security interest in the
collateral;  and  take any other action deemed necessary by Lender without the
consent  of  or notice to anyone.  All such parties also agree that Lender may
modify  this  loan  without  the consent of or notice to anyone other than the
party  with  whom  the  modification  is  made.

PRIOR  TOSIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS, BORROWER AGREES TO
THE  TERMS  OF  THE  NOTE  AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.

BORROWER:

PENN  OCTANE  CORPORATION

By: /S/ JEROME  RICHTER
     ______________________________________________
     JEROME  RICHTER,  PRESIDENT/ASST.  SECRETARY