NEITHER THIS WARRANT NOR THE SHARES OF
                       COMMON STOCK ISSUABLE UPON EXERCISE
          HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
          AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE.
          NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE
          UPON EXERCISE HEREOF MAY BE SOLD OR OTHERWISE TRANSFERRED IN
          THE ABSENCE OF REGISTRATION OR QUALIFICATION OR AN EXEMPTION
                         THEREFROM UNDER APPLICABLE LAW.

                          COMMON STOCK PURCHASE WARRANT
                          Void after November 30, 2001

                                               Warrant to Purchase 16,875 Shares
                                                 of Common Stock, $.01 par value
                                                      of Penn Octane Corporation

                         PENN OCTANE CORPORATION (POCC)

This  is  to  Certify  That,  FOR  VALUE  RECEIVED,

                               James F. Meara, Jr.

or  registered  assign(s)  (herein  referred  to as the "Holder") is entitled to
purchase,  subject  to  the  provisions  hereof, from PENN OCTANE CORPORATION, a
Delaware  corporation  (the "Company"), but not later than 5:00 p.m., California
time,  on  November  30, 2001 (or, if such date is not a Business Day in Redwood
City,  California,  then  on  the  next succeeding day which shall be a Business
Day), 11,250 shares of Common Stock, $.01 par value, of the Company (the "Common
Stock")  at  an  exercise  price of $1.75 per share, subject to adjustment as to
number  of  shares  and  purchase  price  as  set forth in Section 6 below.  The
exercise  price of a share of Common Stock in effect at any time and as adjusted
from  time to time is hereinafter sometimes referred to as the "Exercise Price".
For  purposes  of this Warrant, a "Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in New York, New York,
or  in  Redwood  City, California, are authorized by law or regulation to close.

The  shares of Common Stock issuable upon exercise of the Warrants are sometimes
herein  called  the  "Warrant  Stock."

     1.  Exercise of Warrant.  This Warrant may be exercised in whole or in part
         -------------------
at any time and from time to time by  presentation  and surrender  hereof to the
Company at its  principal  office with the  Purchase  Form  annexed  hereto duly
executed  and  accompanied  by  payment  of the  Exercise  Price in  immediately
available funds for the number of shares specified in such form. If this Warrant
is exercised in part only, the Company shall, upon surrender of this

<PAGE>
Warrant for cancellation, execute and deliver a new Warrant evidencing the right
of the Holder to purchase the balance of the shares purchasable hereunder.  Upon
receipt  by  the Company of this Warrant at the office of the Company, in proper
form  for  exercise,  accompanied  by  payment of the Exercise Price, the Holder
shall  be  deemed  to  be  the  holder  of  record of the shares of Common Stock
issuable upon such exercise, notwithstanding that certificates representing such
shares  of Common Stock shall not then be actually delivered to the Holder.  The
issuance  of  certificates  for shares of Common Stock upon the exercise of this
Warrant  shall  be  made  without  charge  to the Holder for any issuance tax in
respect  thereof  (with  the  exception  of  any  federal  or state income taxes
applicable  thereto),  all  such  taxes  to  be  paid  by  the Company, it being
understood however that the Holder shall be required to pay any tax which may be
payable  in respect of any transfer involved in the issuance and delivery of any
certificate  in  a  name  other than that of the Holder.  The Company will at no
time  close  its  transfer  books  against  the  transfer of this Warrant or the
issuance  of  any  shares  of  Common  Stock  issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.

     2. Reservation of Shares;  Stock Fully Paid. The Company agrees that at all
        ----------------------------------------
times there shall be authorized  and reserved for issuance upon exercise of this
Warrant  such  number of shares of its  Common  Stock as shall be  required  for
issuance or delivery  upon  exercise of this  Warrant.  All shares  which may be
issued  upon  exercise  hereof  will,  upon  issuance,  and  receipt  of payment
therefor, be duly authorized, validly issued, fully paid and non-assessable.

     3. Fractional Shares.  This Warrant shall not be exercisable in such manner
        -----------------
as to require the issuance of fractional  shares.  If, as a result of adjustment
in the  Exercise  Price or the number of shares of Common  Stock to be  received
upon  exercise of this  Warrant,  fractional  shares would be issuable,  no such
fractional  shares shall be issued.  In lieu thereof,  the Company shall pay the
Holder an amount in cash equal to such  fraction  multiplied  by the Fair Market
Value of a share of Common Stock. The term "Fair Market Value" shall mean, as of
a particular date, the market price on such date.

          For purposes of this Warrant, the market price on any day shall be the
last  sale price on such day on the NASDAQ Stock Market, or, if the Common Stock
is  not  then  listed or admitted to trading on the NASDAQ Stock Market, on such
other  principal  stock exchange  on which such stock is then listed or admitted
to  trading,  or,  if  no sale takes place on such day on any such exchange, the
average  of the closing bid and asked prices on such day as officially quoted on
any  such  exchange,  or,  if the Common Stock is not then listed or admitted to
trading on any stock exchange, the average of the reported closing bid and asked
prices  on  such  day  in  the over-the-counter market as quoted on the National
Association  of  Securities  Dealers  Automated  Quotation  System or, if not so
quoted,  then  as  furnished  by  any  member  of  the  National  Association of
Securities  Dealers,  Inc.  selected  by  the  Company.  If  there  shall  be no
meaningful over-the-counter market, then Fair Market Value shall be such amount,
not  less than book value, as may be determined by the Board of Directors of the
Company.

     4. Exchange or Assignment of Warrant.  This Warrant is exchangeable without
        ---------------------------------
expense (other than applicable transfer taxes) at the option of the Holder, upon
presentation  and  surrender  hereof to the  Company  for any other  Warrants of
different  denominations  entitling  the  holder  thereof  to  purchase  in  the
aggregate  the same  number of shares of  Common  Stock  purchasable  hereunder.
Subject to the  provisions of Section 12 below and any  restriction  on transfer
applicable  hereto  pursuant to the securities  laws of the United States or any
State,  upon  surrender of this Warrant to the Company with an  assignment  form
duly executed,  and funds sufficient to pay any transfer tax, the Company shall,
without  charge,  execute and deliver a new Warrant in the name of the  assignee
named in such  instrument  of  assignment,  and this Warrant  shall  promptly be
cancelled.  This Warrant may be divided or combined  with other  Warrants  which
carry the same rights upon presentation hereof at the principal office of the

<PAGE>
Company,  together  with a written notice specifying the names and denominations
in  which  new  Warrants are to be issued signed by the Holder hereof.  The term
"Warrant"  as  used  herein includes any Warrants into which this Warrant may be
divided  or  exchanged, and the term "Holder" as used herein includes any holder
of  any Warrant into which this Warrant may be divided or for which this Warrant
may  be  exchanged.

     5.  Rights of the  Holder.  The Holder  shall  not,  by virtue  hereof,  be
         ---------------------
entitled  to any rights of a  stockholder  in the  Company,  either at law or in
equity,  and the  rights of the Holder are  limited to those  expressed  in this
Warrant.

     6.  Adjustment of Exercise Price and Number of Shares.  The number and kind
         -------------------------------------------------
of securities  purchasable upon the exercise or exchange of this Warrant and the
Exercise  Price  shall be  subject  to  adjustment  from  time to time  upon the
occurrence of certain events, as follows:

     (a)     Adjustment  for  Change in Capital Stock.  If at any time after the
             ----------------------------------------
date  hereof,  the  Company:

          (A)  pays a dividend or makes a  distribution  on its Common  Stock in
               shares of its Common Stock;

          (B)  subdivides its outstanding  shares of Common Stock into a greater
               number of shares;

          (C)  combines  its  outstanding  shares of Common Stock into a smaller
               number of shares;

          (D)  makes a distribution on its Common Stock in shares of its capital
               stock other than Common Stock; or

          (E)  issues by  reclassification of its Common Stock any shares of its
               capital stock;

then  the number and kind of securities purchasable upon exercise or exchange of
this  Warrant  and the Exercise Price in effect immediately prior to such action
shall  each be adjusted so that the Holder may receive upon exercise or exchange
of  this  Warrant and payment of the same aggregate consideration, the number of
shares  of  capital  stock  of  the  Company  which  the Holder would have owned
immediately  following  such action if the Holder had exercised or exchanged the
Warrant  immediately  prior  to  such  action.

     The  adjustment shall become effective immediately after the record date in
the  case of a dividend or distribution and immediately after the effective date
in  the  case  of  a  subdivision,  combination  or  reclassification.

     (b)     Adjustment  for Other Distributions.  If at any time after the date
             -----------------------------------
hereof,  the  Company  distributes to all holders of its Common Stock any of its
assets or debt securities, the Exercise Price following the record date shall be
adjusted  in  accordance  with  the  following  formula:

                    E'=E  x  M-F
                             ---
                              M

where:    E'  =  the  adjusted  Exercise  Price.

              E  =  the  Exercise  Price  immediately prior to the adjustment.

<PAGE>
              M  =  the  current  market  price  (as defined in (e) below) per
                    share  of  Common  Stock  on  the  record  date  of  the
                    distribution.

              F  =  the  aggregate  fair  market  value  (as  conclusively
                    determined  by  the  Board of Directors of the Company) on
                    the  record  date  of  the assets or debt securities to be
                    distributed divided by the number of outstanding shares of
                    Common  Stock.

     The adjustment shall be made successively whenever any such distribution is
made  and  shall  become  effective  immediately  after  the record date for the
determination  of  shareholders  entitled  to  receive the distribution.  In the
event  that  such  distribution  is  not actually made, the Exercise Price shall
again  be  adjusted to the Exercise Price as determined without giving effect to
the  calculation  provided  hereby.  In  no  event  shall  the Exercise Price be
adjusted  to  an  amount  less  than  zero.

     This subsection does not apply to cash dividends or cash distributions paid
out  of  consolidated  current or retained earnings as shown on the books of the
Company  and  paid  in  the  ordinary  course  of  business.

     (c)     Deferral  of  Issuance  or  Payment.  In any case in which an event
             -----------------------------------
covered by this Section 6 shall require that an adjustment in the Exercise Price
be  made  effective  as  of a record date, the Company may elect to defer making
such  adjustment  until  the occurrence of such event.  If the Company so defers
making  any  such  adjustment and if this Warrant is exercised after such record
date  but  before  the  occurrence of such event, the shares of Common Stock and
other  capital  stock  of  the Company, if any, issuable upon such exercise, had
such  adjustment  been  made as of the record date, over and above the shares of
Common  Stock  or other capital stock of the Company, if any, issuable upon such
exercise  on  the  basis  of  the  Exercise Price as unadjusted, shall be issued
promptly  upon  the  occurrence  of  such event and the Company shall pay to the
Holder by check any amount in lieu of the issuance of fractional shares pursuant
to  Section  3.

     (d)     When  No  Adjustment  Required.  No  adjustment  need be made for a
             ------------------------------
change  in  the  par  value  or  no  par  value  of  the  Common  Stock.

     (e)     Statement  of  Adjustments.  Whenever the Exercise Price and number
             --------------------------
of  shares  of  Common Stock purchasable hereunder is required to be adjusted as
provided  herein, the Company shall promptly prepare a certificate signed by its
President  or  any  Vice  President  and  its  Treasurer or Assistant Treasurer,
setting  forth,  in  reasonable  detail, the event requiring the adjustment, the
amount  of  the  adjustment,  the method by which such adjustment was calculated
(including a description hereunder), and the Exercise Price and number of shares
of  Common  Stock  purchasable hereunder after giving effect to such adjustment,
and shall promptly cause copies of such certificates to be mailed to the Holder.

     (f)     No  Adjustment  Upon Exercise of Warrants.  No adjustments shall be
             -----------------------------------------
made  under  any Section herein in connection with the issuance of Warrant Stock
upon  exercise  or  exchange  of  the  Warrants.

     (g)     No  Adjustment  for Small Amounts.  Anything herein to the contrary
             ---------------------------------
notwithstanding, no adjustment of the Exercise Price shall be made if the amount
of  such  adjustment  shall  be  less than $.05 per share, but in such case, any
adjustment  that  would  otherwise  be required then to be made shall be carried
forward  and  shall  be  made  at the time and together with the next subsequent
adjustment  which, together with any adjustment so carried forward, shall amount
to  $.05  per  share  or  more.

<PAGE>
     (h)     Common  Stock  Defined.  Subject  to  the  provisions  of Section 7
             ----------------------
hereof,  shares  issuable  upon  exercise  or exchange hereof shall include only
shares  of  the  class  designated as Common Stock of the Company as of the date
hereof  or shares of any class or classes resulting from any reclassification or
reclassifications  thereof  or  as  a  result of any corporate reorganization as
provided  for  in  Section  7  hereof.

     7. Reclassification,  Reorganization, Consolidation or Merger. In the event
        ----------------------------------------------------------
of any reclassification,  capital  reorganization or other change of outstanding
shares of Common Stock of the Company  (other than a subdivision  or combination
of the outstanding  Common Stock and other than a change in the par value of the
Common Stock) or in the event of any consolidation or merger of the Company with
or into another  corporation (other than a merger in which merger the Company is
the  continuing  corporation  and that does not result in any  reclassification,
capital  reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise or exchange of this Warrant) or in the event of
any sale, lease,  transfer or conveyance to another  corporation of the property
and assets of the Company as an entirety or  substantially  as an entirety,  the
Company shall,  as a condition  precedent to such  transaction,  cause effective
provisions  to be made so that the Holder  shall have the right  thereafter,  by
exercising this Warrant,  to purchase the kind and amount of shares of stock and
other   securities  and  property   (including   cash)   receivable   upon  such
reclassification,   capital  reorganization  and  other  change,  consolidation,
merger,  sale or  conveyance by a holder of the number of shares of Common Stock
that  might  have been  received  upon  exercise  or  exchange  of this  Warrant
immediately  prior to such  reclassification,  capital  reorganization,  change,
consolidation,  merger,  sale or conveyance.  Any such  provision  shall include
provisions  for  adjustments  in  respect  of such  shares  of stock  and  other
securities and property that shall be as nearly equivalent as may be practicable
to the  adjustments  provided for in this Warrant.  The foregoing  provisions of
this Section 7 shall  similarly apply to successive  reclassifications,  capital
reorganizations  and  changes  of  shares  of  Common  Stock  and to  successive
consolidations,  mergers, sales or conveyances.  In the event that in connection
with any such capital reorganization or classification,  consolidation,  merger,
sale or  conveyance,  additional  shares  of  Common  Stock  shall be  issued in
exchange, conversion,  substitution or payment, in whole or in part, for, or of,
a security  of the  Company  other than  Common  Stock,  any such issue shall be
treated as an issue of Common Stock covered by the  provisions of subsection (a)
of Section 6.

     8. Notice to Warrant Holders. So long as this Warrant shall be outstanding,
        -------------------------
(i) if the  Company  shall pay any  dividend or make any  distribution  upon its
Common Stock,  or (ii) if the Company shall offer to the holders of Common Stock
for  subscription  or purchase by them any shares of stock or  securities of any
class  or any  other  rights,  or  (iii) if any  capital  reorganization  of the
Company,  reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially  all of the assets of the Company,  or voluntary or involuntary
dissolution or  liquidation of the Company shall be effected,  then, in any such
case,  the Company shall cause to be mailed to the Holder,  at least thirty (30)
days  prior to the date  specified  in (x) or (y)  below,  as the case may be, a
notice  containing a brief  description  of the proposed  action and stating the
date on which  (x) a record  is to be taken for the  purpose  of such  dividend,
distribution   or  rights,   or  (y)  such   reclassification,   reorganization,
consolidation,  merger, conveyance,  dissolution or liquidation is to take place
and the date, if any is to be fixed,  as of which the holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for securities
or  other  property  deliverable  upon  such  reclassification,  reorganization,
consolidation, merger, conveyance, dissolution or liquidation.

     9. Certain Obligations of the Company.  The Company agrees that it will not
        ----------------------------------
increase the par value of the shares of Warrant Stock  issuable upon exercise of
this Warrant  above the  prevailing  and  currently  applicable  Exercise  Price
hereunder,  and that before  taking any action  that would  cause an  adjustment
reducing the prevailing and current  applicable  Exercise Price  hereunder below
the then par value of the Warrant Stock at the time issuable

<PAGE>
upon  exercise  of this Warrant, the Company will take such corporate action, as
in  the  opinion  of its counsel, may be necessary in order that the Company may
validly  issue  fully  paid,  nonassessable  shares  of such Warrant Stock.  The
Company  will  maintain  an  office  or  agency  (which  shall  initially be the
Company's  principal office in Redwood City, California) where presentations and
demands  to  or upon the Company in respect of this Warrant may be made and will
give  notice  in  writing  to  the  registered  holders  of the then outstanding
Warrants,  at  their  addresses  as  shown  on the books of the Company, of each
change  of  location  thereof.

     10. Repurchase Right. Notwithstanding any other provisions of this Warrant,
         ----------------
the Company may, in the event that the average  trading  price of the  Company's
Common Stock,  as reported on the NASDAQ  SmallCap Market or such other exchange
on which the  Company's  Common Stock may then be quoted,  exceeds  $10.00 for a
period of twenty (20)  consecutive  trading days, upon not less than thirty (30)
days'  notice in writing to the  Holder,  repurchase  all or any portion of this
Warrant  at a purchase  price  equal to $.10 per share of Common  Stock  covered
hereby, such purchase price to be proportionally adjusted each time the Exercise
Price is  adjusted  pursuant  to Section 6 hereof.  During  such thirty (30) day
period, the Holder may exercise such Warrants or a portion thereof in accordance
with the terms hereof.  The closing on such  repurchase  shall occur on the date
and at the time set forth in such notice at the office of the Company in Redwood
City,  California  or at such other place as shall be agreed upon by the Company
and the  Holder.  At the  Closing,  the Company  shall  deliver to the Holder an
amount equal to the purchase price in immediately available funds and the Holder
will  deliver this  Warrant to the Company for  cancellation.  To the extent any
repurchase  hereunder  is of less  than all of the  rights  represented  by this
Warrant,  the  Company  will  deliver to the Holder a new Warrant  covering  the
rights not so purchased.

     11. Determination by Board of Directors. All determinations by the Board of
         -----------------------------------
Directors of the Company  under the  provisions  of this Warrant will be made in
good faith with due regard to the interest of the Holder and in accordance  with
sound financial practices.

     12. Notice. All notices to the Holder shall be in writing,  and all notices
         ------
and certificates given to the Holder shall be sent registered or certified mail,
return receipt requested, to such Holder at his address appearing on the records
of the Company.

     13.  Replacement of Lost,  Stolen,  Destroyed or Mutilated  Warrants.  Upon
          ---------------------------------------------------------------
receipt of evidence  reasonably  satisfactory to the Company of the loss, theft,
destruction  or  mutilation  of this  Warrant and, in the case of any such loss,
theft or  destruction,  upon delivery of any indemnity  bond in such  reasonable
amount as the Company may determine in the case of any such mutilation, upon the
surrender of such  Warrant for  cancellation,  the Company at its expense,  will
execute  and  deliver,  in lieu of such lost,  stolen,  destroyed  or  mutilated
Warrant, a new Warrant of like tenor.

     14.  Number and Gender.  Whenever the singular  number is used herein,  the
          -----------------
same shall include the plural where  appropriate,  and words of any gender shall
include each other gender where appropriate.

<PAGE>
     15.  Applicable  Law.  This Warrant  shall be governed by, and construed in
          ---------------
accordance  with,  the laws of the  State of New  York,  without  regard  to its
conflict of laws principles.


                                   PENN  OCTANE  CORPORATION


                                   By:
                                      -----------------------
                                   Name:  Jerome  B.  Richter
                                   Title:  Chairman,  President  and
                                   Chief  Executive  Officer

Dated:  December  1,  1998

<PAGE>
                                  PURCHASE FORM
                                  -------------


                                                         Dated __________ , ____


          The  undersigned  hereby  irrevocably  elects  to  exercise the within
Warrant  to purchase ________ shares of Common Stock and hereby makes payment of
$____________  in  payment  of  the  exercise  price  thereof.



                                   Signature______________________________

<PAGE>