PROMISSORY NOTE

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PRINCIPAL   LOAN DATE    MATURITY   LOAN NO.  CALL  COLLATERAL  ACCOUNT  OFFICER  INITIALS
33,000.00   05-28-1997  05-29-1998                                         103
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<S>         <C>         <C>         <C>       <C>   <C>         <C>      <C>      <C>
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  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 VENTERANS BLVD, STE 240              900 VETERANS BLVD.
           REDWOOD CITY, CA 94063                   P.O. BOX 2579
                                                    REDWOOD CITY, CA 94064

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PRINCIPAL AMOUNT:  $33,000.00 INTEREST RATE: 0.000% DATE OF NOTE: MAY 29, 1997

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  THIRTY  THREE  THOUSAND & 00/100 DOLLARS
($33,000.00),  TOGETHER  WITH  INTEREST AT THE RATE OF 0.000% PER ANNUM ON THE
UNPAID  PRINCIPAL  BALANCE  FROM  MAY  28,  1997,  UNTIL  PAID  IN  FULL.

PAYMENT.    BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN
ONE  PRINCIPAL  PAYMENT  OF  $33,000.00  PLUS  INTEREST ON MAY 29, 1998.  THIS
PAYMENT  DUE  MAY 29, 1998, WILL BE FOR ALL PRINCIPAL AND ACCRUED INTEREST NOT
YET  PAID.    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 outstanding principal balance,
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.

PREPAYMENT.    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.

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 to this Note, or in any other agreement or loan
Borrower  has  with  Lender.    (c)  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
proceeding  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.  (f)
Any  guarantor  dies  or  any  of  the  other events described in this default
section  occurs  with  respect  of 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 in impaired.

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
reasonable  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  the  interest  rate  on this Note 5.000 percentage
points.      Lender  may hire or pay someone else to help collect this Note if
Borrower  does  not  pay.    Borrower  also will pay Lender that amount.  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  proceeding (including
efforts  to  modify  or vacate any automatic stay or injunction), appeals, and
any  anticipated  post-judgement  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 pre-authorized charge with
which  borrower  pays  is  later  dishonored.

GENERAL PROVISION.  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 endorses 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, any unless otherwise expressly stated in
writing,  no  party  who  signs  this  Note,  whether  as  make,  guarantor,
accommodation  maker  or endorser, shall be released from liability.  All such
parties  agree  that Lender may renew or extent (repeatedly and for any length
or  time)  this  loan,  or  release  any  party or guarantor or collateral; or
impair,  fail  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.


<PAGE>
05-28-97                        PROMISSORY NOTE                         PAGE 2
                                  (CONTINUED)

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS  NOTE.  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 B. RICHTER
     -----------------------------------------
     JEROME  B.  RICHTER,  PRESIDENT/SECRETARY

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