Exhibit 10.05

                                EMPLOYEE CONTRACT


     THIS  AGREEMENT  the ("Agreement") entered into and effective this 29th Day
of  July  2002, between Penn Octane Corporation, the ("Corporation"), and Jerome
B. Richter, ("Employee"), 335 Tomahawk Drive, Palm Desert, CA 92211.


                                    WITNESETH


     WHEREAS,  Employee has indicated his interest in renewing his employment as
Chief  Executive  Officer  of  the  Company  and the Company has determined that
Employee  has  the requisite skills and experience and that it desires to engage
Employee  for  this  purpose;

     NOW,  THEREFORE,  for  and  in consideration of the compensation to be paid
Employee  hereunder  and the mutual promises, covenants, and undertakings herein
contained, Employee and Corporation hereby agree as follows:

     SECTION 1. Term. The initial term of this Agreement shall be for the period
                ----
commencing  July 29, 2002 and continuing until July 29, 2005. Upon expiration of
the  initial  term,  this  Agreement  will  continue  year  to  year.


     SECTION  2.  Responsibilities.  During the term of this Agreement, Employee
                  ----------------
will,  in  the capacity of the Chief Executive Officer (CEO), remain as a member
of  the  Board  of  the  Corporation  (Chairman),  as  well as CEO of all of the
Corporation's existing and future subsidiaries. As CEO he will be responsible of
managing  all  existing  and  future  investments of the Corporation, as well as
presiding  over  and  implementing  the  corporations  policies,  direction  and
administration.

     SECTION  3.  Employee  Benefits.
                  ------------------

     (a)     It  is understood and agreed that Employee shall act as an Employee
of  the Corporation in the undertaking of this Agreement.  With the execution of
this  Agreement,  it  is  expressly  understood  and  stipulated  that  an
employer-employee  relationship will exist between the Corporation and Employee.
With  the  exception  of  the  duties created by this Agreement, it is agreed by
Employee  and  the Corporation that neither party is the agent of the other, and
neither  has  authority  to  bind  or  obligate  the  other party in any way not
beneficial  to  the  Corporation  and/or  the  Employee.

     (b)     Employee  will  be  eligible  for  all  employee  benefits, and the
Corporation  may  make  deductions from Contributions Act (F.I.C.A.), insurance,
bonds  or other subscription of any kind.  Additionally, the Corporation will be
responsible  for  collecting  taxes and/or assessments which may be attributable
under Federal or California law to the compensation paid to Employee.


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     (c)     Employee  will be granted, upon execution of this Agreement, a term
life  insurance policy commensurate with the term of this agreement, equal to $5
million.


     SECTION  4.  Compensation.
                  ------------

     (a)  Base  Compensation.  For providing his services, the Corporation shall
          ------------------
          pay  Employee  a monthly salary equal to $25,000 (Twenty Five Thousand
          Dollars).
     (b)  Incentive Bonus Program. On an annual basis, Employee will be entitled
          -----------------------
          to a minimum bonus payment equal to $100,000 plus five percent (5%) of
          Net  Income Before Taxes (but after required interest payments) of the
          Corporation.
     (c)  Incentive  Stock Options. Prior to December 31, 2002, the Compensation
          ------------------------
          Committee  of  the  Board  of  Directors shall recommend and the Board
          shall  approve an Employee stock option grant for an amount of options
          terms  of  vesting  and  exercise that are commensurate with its prior
          practices. In addition, the Corporation shall include Employee's stock
          options  in  any  re-pricing  of  stock  options  undertaken  by  the
          Corporation.
     (d)  Forgiveness  Of  Interest On Stock Loan. Pursuant to the existing note
          ---------------------------------------
          with  employee,  dated  April  11, 2000, as amended, during any fiscal
          year  of  the  Corporation, the Corporation shall forgive any interest
          due  from  Employee  pursuant  to  Employee's  Stock  Loan  due to the
          Corporation,  provided that Employee guarantees at least $2 million of
          the  Corporation's  indebtedness during any period of that fiscal year
          of  the  Corporation.
     (e)  Forgiveness  Of  Stock  Loan.  Pursuant  to  the  existing  note  with
          ----------------------------
          employee,  dated  April  11,  2000,  as amended, the existing Employee
          Stock  Loan due to the Corporation shall be forgiven in the event that
          either  of  the  following  two  conditions  are  realized:

          i.   The  share  price  of the Corporation's common stock trades for a
          --   period  of  90  days at a blended average price equal to 2x's the
               closing  price  of  the Corporation's common stock on the date of
               this  agreement,  or
          ii.  The  Corporation  is sold for a price per share (or an asset sale
          ---  realizes  revenues  per share) equal to 2x's the closing price of
               the  Corporation's  common  stock  on the date of this agreement.
     (f)  Unpaid  prior  compensation.  In  connection  with Employee's services
          ---------------------------
          prior  to  the  date  of this Agreement, Employee shall be entitled to
          receive  unpaid  compensation  earned  but not received as of July 28,
          2002  consisting  of:
          i.   A  bonus  of $100,000 plus five percent (5%) of Net Income Before
          --   Taxes  (but  after required interest payments) of the Corporation
               for the period August 1, 2001 through the date of this Agreement.
          ii.  The bonus above shall be partially paid through the offset of any
          ---  net  advances  made to Employee as of the date of this Agreement.
          iii. Any  remaining  amounts  due to Employee from (f)(i.) above shall
          ---- not be paid until Employee's $200,000 note to the Corporation has
               been  repaid.
          iv.  Any accrued but unpaid salary through the date of this Agreement.
          ---

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               Employee  is  not  entitled  to any other compensation related to
               services  performed  prior  to  the  date  of  this  Agreement
     (g)  Reimbursement  of  expenses.  Employee  shall  be  reimbursed  for all
          ---------------------------
          expenses  incurred in connection with performing services on behalf of
          the  Corporation.  Employee shall be required to provide documentation
          for  such  expenses  in  accordance  with  the  Corporation's  expense
          reimbursement  policies.

          The Corporation further agrees that it will reimburse Employee for any
          expenses  related  to  the  travel  of  Employee's  wife  to accompany
          Employee  during  any  period  in which the proper care for Employee's
          wife  cannot  be  arranged.

     SECTION  5.  The  Corporation  and  Employee hereby expressly stipulate and
agree  that  the  post-contractual  restraints agreed upon herein are reasonably
necessary  to  protect  the  business  and  goodwill of the Corporation upon the
termination  of  this  Agreement.


     SECTION  6.  Covenant  Against  Competition:  Court  Ordered  Modification.
                  -------------------------------------------------------------

     (a)     Employee  agrees  that, until one year from the termination of this
agreement,  he  will  not participate in any business venture that competes with
the  Corporation  without  the  expressed written permission of the Corporation.

     (b)     Confidentiality of Information.  Employee acknowledges that, in the
             ------------------------------
course of performing services for the Corporation, he may receive or be privy to
certain producer, end user or transporting pipeline client lists, trade secrets,
programs,  lists  of customer or trading accounts, business records or audits of
the  Corporation,  corporate  insider  information,  proprietary  financing
structures,  and  other  confidential  information  and knowledge concerning the
business  of the Corporation, its corporate parent, stockholders or subsidiaries
(herein  collectively  referred  to as the "Confidential Information") which the
Corporation  desires  to  protect.  Employee  understands  that the Confidential
Information  is  confidential  and  he  covenants  and  agrees not to reveal the
Confidential  information  to  anyone,  directly  or  indirectly,  outside  the
Corporation  so  long  as  the confidential or secret nature of the Confidential
information shall continue.  Employee further agrees that he will at no time use
the  Confidential  information  in  competing  with  the  Corporation.  Upon
termination  of  this  agreement,  Employee  shall surrender the Corporation all
papers,  documents,  writings, and other property produced by him or coming into
his  possession  by  or through his relationship with the Corporation (including
computer  programs  or information derived form Corporation's computer database)
and  Employee  agrees  that  all  such  materials  shall at all times remain the
property  of  the  Corporation.


     SECTION  7. Indemnity. Corporation hereby covenants and agrees to indemnify
                 ---------
and hold harmless Employee, (hereinafter referred to as the "Indemnified Party")
from  any and all suits, actions or claims of any character, type or description
made  for  or  in account of any injuries, damages alleged, or amounts allegedly
owed  as  a result of claims, demands, costs or judgments against it arising out
of  or  relating  to,  whether  directly  or  indirectly,  the  performance


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of  services  hereunder  by  Employee. Notwithstanding anything to they contrary
contained  herein,  this indemnity shall apply notwithstanding any negligence or
alleged  negligence on the part of the Indemnified Party. Indemnified Party may,
at  its  option,  conduct  the defense in any such third party action arising as
described  herein,  and Corporation agrees to fully cooperate with such defense.


     SECTION  8.  Enforcement: Attorney's Fees. If Employee must resort to legal
                  ----------------------------
action in order to enforce any of the terms of this Agreement, Employee shall be
entitled to recover the costs of such action, including, but not limited to, all
legal fees any court costs associated with such legal proceedings.

     SECTION  9.  Notices.  All  notices,  requests,  consents,  and  other
                  -------
communications  regarding this Agreement shall be in writing and shall be deemed
to  have been delivered on the dated personally delivered or on the date mailed,
postage  prepaid, by certified mail, return receipt requested, to the respective
parties  as  follows:

                        If  to  the  Corporation:

                        Mr.  Jerome  B.  Richter
                        Chairman  of  the  Board
                        Penn  Octane  Corporation
                        77-530  Enfield  Lane,  Bldg  D
                        Palm  Desert,  CA  92211

Provided,  however,  that  any party shall have the right to change such party's
address  for  notice  hereunder  to  any location by the giving of notice to the
other  party  in  the  manner  set  forth  above.


     SECTION  10.  Severability.  Whenever  possible,  each  provision  of  this
                   ------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable  law and if any provision of this Agreement shall be prohibited by or
invalid  under applicable law, such provision shall be ineffective to the extent
of  such  prohibition and invalidity, without invalidating the remainder of such
provision  or  the  remaining  provisions  of  the  Agreement.

     SECTION  11. Assignability. This Agreement is not assignable by Employee to
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any  other  person,  partnership,  firm,  corporation  or other recognized legal
entity,  except  with  the  written  consent  of  the  Corporation.

     SECTION  12.  Governing Law. This Agreement shall be construed and enforced
                   -------------
in  accordance  with any governed by the laws of the State of California and the
United  States  of  America.


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     SECTION  13. Captions. The section and paragraph headings of this Agreement
                  --------
are  for reference purposes only and shall not effect in any way the meaning and
interpretation  of  this  Agreement.


     SECTION  14.  Entire  Agreement  Amendment.  This Agreement constitutes the
                   ----------------------------
entire  Agreement  between  the  parties respecting the services of Employee and
there  are  not  representations, warranties, Agreements, or commitments between
the  parties  hereto  except  as set forth herein. This Agreement may be amended
only  by  an  instrument  in  writing  executed by the Corporation and Employee.

     SECTION  15. Execution. This Agreement may be executed in multiple original
                  ---------
counterparts,  each  of  which  shall  be  deemed  an original, but all of which
together  shall  constitute  the  same  instruments.

     SECTION  16.  Binding  Effect.  This  Agreement  is  for the benefit of the
                   ---------------
Corporation  and  Employee  and  shall  be  binding  upon and enforceable by and
against  their successors, assigns, respective heirs, donees, pledges, devisees,
transferees,  and  representatives.

     SECTION  17.  Waiver.  The waiver of any condition or breach of any term or
                   ------
condition  of this Agreement shall not be deemed to constitute the waiver of any
other  condition  or  breach  of the same or any other term or condition of this
agreement.

     SECTION  18.  Survival  of  Covenants  and  Conditions.  The  provisions of
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Sections 6, 7, 8 and 9 hereof shall survive the termination of this Agreement.


IN  WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
its  duly  authorized officer, and Employee has executed this Agreement, in each
case  as  of  the date first above written.  This Agreement is to be executed in
duplicate  counterparts,  each  of  which  shall  be  considered  an  original.



PENN  OCTANE  CORPORATION


By:/s/  Emmett  Murphy                              /s/Jerome  Richter
   -------------------                              ------------------
                                                              EMPLOYEE
Name:                                               Date
     -------------------------                          ------------------------

Title:
      ------------------------

Dated:
      ------------------------


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