PROMISSORY NOTE

$100,000           New York, New York            October 7, 1996


 FOR VALUE RECEIVED, PENN OCTANE CORPORATION, a Delaware
 Corporation ("Maker"), promises to pay to JERRY WILLIAMS
 ("Holder") at such place as Holder may designate in writing,
 the entire principal sum of One Hundred Thousand Dollars
 ($100,000), together with interest at the rate of ten percent
 (10%) per annum, on November 7, 1997 (the "Payment Date"), at
 which time all principal and interest shall be due and owing.
 In the event the Company receives in excess of two hundred fifty
 thousand ($250,000) dollars in connection with an offering of Maker's
 securities prior to the Payment Date, the Company shall utilize
 one-half of the proceeds from such sale to satisfy the Promissory
 Note.  In the event such payment does not fully satisfy the
 Promissory Note, Maker shall pay the balance on the Payment Date.

 All payments of principal and interest hereunder shall be payable
 in lawful money of the United States.

 Maker shall be in default hereunder, at the option of Holder,
 upon the occurrence of any of the following events:  (i) the
 failure by Maker to make any payment of principal or interest
 when due hereunder, and such failure shall have continued for a
 period of more than ten (10) days;  (ii) the entering into of a
 decree or order by a court of competent jurisdiction adjudicating
 Maker a bankrupt or the appointing of a receiver or trustee of Maker
 upon the application of any creditor in an insolvency or bankruptcy
 proceeding or other creditor's suit; (iii) a court of competent
 jurisdiction approving as properly filed, a petition for reorganization
 or arrangement filed against Maker under the Federal bankruptcy laws
 and such decree or order not being vacated within thirty (30) days;
 (iv) the pendency of any bankruptcy proceeding or other creditors'
 suit against Maker; (v) a petition or answer seeking reorganization
 or arrangement under the Federal bankruptcy laws with respect to
 Maker; (vi) an assignment for the benefit of creditors by Maker;
 (vii) Maker consents to the appointment of a receiver or trustee in an
 insolvency or bankruptcy proceeding or other creditors' suit; (viii)
 the existence of any uncured event of default under the terms of
 any instrument in writing evidencing a debt to someone other than
 Holder, provided, the Maker is not contesting in good faith by
 appropriate proceedings such uncured event of default; (ix) the
 existence of any judgment against, or any attachment of property
 of Maker; or (x) any other condition which, in the good faith
 determination of Holder, would materially impair the timely repayment
 of this Note.

 Upon the occurrence of any event or condition of default hereunder,
 or at any time thereafter, Holder at his option may accelerate the
 maturity of this Note and declare all of the indebtedness or any
 portions thereof to be immediately due and payable, together with
 accrued interest thereon, and payment thereof may be enforced by
 suit or other process of law.  

 If this Note is not paid when due, whether at maturity or by
 acceleration, Maker agrees to pay all reasonable costs of collection
 and such costs shall include without limitation all costs, attorneys'
 fees and expenses incurred by Holder hereof in connection with any
 insolvency, bankruptcy, reorganization, arrangement or similar
 proceedings involving Holder, or involving any endorser or guarantor
 hereof, which in any way affects the exercise by Holder hereof of its
 rights and remedies under this Note.

 Presentment, demand, protest, notices of protest, dishonor and
 non-payment of this Note and all notices of every kind are hereby waived.

 The terms "Maker" and "Holder" shall be construed to include their
 respective heirs, personal representatives, successors, subsequent
 holders and assigns.

 Regardless of the place of execution or performance, this letter
 and the Note shall be governed by, and construed in accordance with,
 the laws of the State of New York without giving effect to such state's
 conflicts of laws provisions.  Each of the parties hereto irrevocably
 consents to the jurisdiction and venue of the federal and state courts
 located in the State of New York, County of New York.



PENN OCTANE CORPORATION






By: /s/ J.B. Richter

Chairman