-----------------------------------------------------------------------------


                   U. S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                  FORM 10-QSB


     [X]          QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF
                    THE SECURITIES AND EXCHANGE ACT OF 1934

     For  the  quarterly  period  ended  January  31,  1997
                                         ------------------

     [  ]          TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR 15 (D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

     For  the  transition  period  from  ____________  to  _____________

     Commission  File  No.  0-24394

                            PENN OCTANE CORPORATION
              (Exact name of registrant as specified in charter)

             DELAWARE                           52-1790357
 (State  or other jurisdiction of     (I.R.S. Employer Identification No.)
  incorporation  or  organization)
5847  SAN  FELIPE,  SUITE  3420,     HOUSTON,  TX          77057
 (Address  of  principal  executive  offices)            (Zip  Code)

                                (713) 952-5703
             (Registrant's telephone number, including area code)






     Indicate  by  check mark whether the Registrant (1) has filed all reports
required  to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or for such shorter period that the
Registrant  was  required  to  file such reports), and (2) has been subject to
such  filing  requirements  for  the  past  90  days.    YES      X  NO____
                                                            -------

     As of January 31, 1997, 5,205,000 shares of the Registrant's common stock
were  outstanding.


------------------------------------------------------------------------------

<PAGE>
                            PENN OCTANE CORPORATION


                                     INDEX

<TABLE>
<CAPTION>

<S>       <C>                                                          <C>

PART I.   FINANCIAL INFORMATION:

Item 1.   Financial Statements

          Balance Sheet as of January 31, 1997                             3

          Statements of Operations for the three and six months ended
          January 31, 1997 and 1996                                        4

          Statements of Cash Flows for the three and six months ended
          January 31, 1997 and 1996                                        5

          Notes to Financial Statements                                 6-10

Item 2.   Management's Discussion and Analysis or Plan
          of Operation                                                 11-14


PART II.  OTHER INFORMATION:

Item 1.   Legal Proceedings                                               15

Item 2.   Changes in Securities                                           15

Item 3.   Defaults Upon Senior Securities                                 15

Item 4.   Submission of Matters to a Vote of Security Holders             15

Item 5.   Other Information                                               15

Item 6.   Exhibits and Reports on Form 8-K                             15-16
</TABLE>




<PAGE>
                            PENN OCTANE CORPORATION
PART  I  -  ITEM  1
<TABLE>
<CAPTION>

                                          BALANCE SHEET
                                           (Unaudited)


ASSETS                                                                          January 31, 1997
                                                                               ------------------
<S>                                                                            <C>

Cash                                                                           $          49,469 
Restricted cash                                                                            4,685 
Trade accounts receivable                                                                464,442 
Inventories                                                                              745,977 
Prepaid expenses                                                                          86,408 
                                                                               ------------------

  Total current assets                                                                 1,350,981 

Property, plant and equipment (net of accumulated depreciation of $1,033,660)          3,182,561 
Lease rights (net of accumulated amortization of $375,063)                               778,977 
Other noncurrent assets                                                                   13,257 
                                                                               ------------------

  Total assets                                                                 $       5,325,776 
                                                                               ==================


  LIABILITIES & STOCKHOLDERS' EQUITY

Short-term borrowing                                                                     772,552 
Current maturities of long-term debt                                                   1,401,403 
Construction accounts payable                                                            440,021 
Trade accounts payable                                                                   554,566 
Accrued liabilities                                                                      615,664 
                                                                               ------------------

  Total current liabilities                                                            3,784,206 

Long-term debt                                                                            60,043 

Stockholders' equity
  Preferred stock-$.01 par value, 5,000,000 shares authorized;
    270,000 convertible shares issued and outstanding at
    January 31, 1997                                                                       2,700 
  Common stock-$.01 par value, 25,000,000 shares authorized;
    5,205,000 shares issued and outstanding at January 31, 1997                           52,050 
  Additional paid-in capital                                                           5,954,566 
  Accumulated deficit                                                                 (4,527,789)
                                                                               ------------------

      Total stockholders' equity                                                       1,481,527 
                                                                               ------------------

      Total liabilities and stockholders' equity                               $       5,325,776 
                                                                               ==================
</TABLE>




See  Notes  to  Financial  Statements

<PAGE>
                            PENN OCTANE CORPORATION

                           STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                  Three  Months  Ended            Six  Months  Ended
                                                  --------------------            ------------------
                                                January 31,    January 31,    January 31,    January 31,
                                                   1997           1996           1997           1996
                                               -------------  -------------  -------------  -------------
<S>                                            <C>            <C>            <C>            <C>
Revenues                                       $ 13,513,164   $  6,716,715   $ 16,059,657   $ 12,273,507 

Cost of goods sold                               12,728,248      6,327,356     15,481,213     11,592,906 
                                               -------------  -------------  -------------  -------------

  Gross profit                                      784,916        389,359        578,444        680,601 

Selling, general and administrative expenses        466,011        402,947        893,200        728,924 
                                               -------------  -------------  -------------  -------------

  Operating income (loss)                           318,905        (13,588)      (314,756)       (48,323)

Other income (expense)
  Interest income (expense)                         (69,879)       (63,501)      (123,506)      (117,862)
                                               -------------  -------------  -------------  -------------

    Net income (loss) before taxes                  249,026        (77,089)      (438,262)      (166,185)

Provision for income taxes                                0              0              0              0 
                                               -------------  -------------  -------------  -------------

  Net income (loss)                                 249,026   $    (77,089)  $   (438,262)  $   (166,185)
                                               =============  =============  =============  =============

  Earnings (loss)
  per common share                             $        .04   $       (.02)  $       (.08)  $       (.03)
                                               =============  =============  =============  =============


  Weighted average common
    shares outstanding                            5,205,000      5,085,000      5,205,000      5,082,283 
                                               =============  =============  =============  =============

</TABLE>




See  Notes  to  Financial  Statements

<PAGE>
                            PENN OCTANE CORPORATION

                           STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                    Three  Months  Ended             Six  Months  Ended
                                                    --------------------             ------------------
                                                 January 31,    January 31,    January 31,    January 31,
                                                    1997           1996           1997           1996
                                                -------------  -------------  -------------  -------------
<S>                                             <C>            <C>            <C>            <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income (loss)                               $    249,026   $    (77,089)  $   (438,262)  $   (166,185)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
  Depreciation and Amortization                      140,094        173,299        283,963        341,820 

Changes in current assets and liabilities
  Restricted cash                                    495,315              0         (4,685)             0 
  Trade accounts receivable                         (117,959)       (75,985)      (432,560)       (96,191)
  Interest receivable                                      0            134         26,233            273 
  Note receivable                                          0              0              0        100,000 
  NPEG note                                                0              0              0        190,843 
  Inventories                                         55,574        (94,661)      (300,926)       (94,661)
  Prepaids and other current assets                   (1,579)         1,229        (19,289)        52,567 
  Construction and accounts payable                 (750,338)        74,217        101,422        (56,370)
  Advances from and to related party (net)                 0         (8,225)             0        (47,360)
  Accrued liabilities                                 (9,803)       (47,942)        64,753        (49,306)
  Other assets and liabilities, net                   (7,836)             0         (7,836)             0 
                                                -------------  -------------  -------------  -------------
    Net cash provided by (used in)
    operating activities                              52,494        (55,023)      (727,187)       175,430 

Cash flows from investing activities
  Capital expenditures                                   (25)           247         (5,400)       (70,833)
  Other                                                    0          8,759              0          7,529 
                                                -------------  -------------  -------------  -------------
    Net cash provided by (used in)
    investing activities                                 (25)         9,006         (5,400)       (63,574)

Cash flows from financing activities:
  Short-term borrowing                                     0              0        100,000       (160,000)
  Long-term debt borrowing                                 0         (2,325)       325,000         (3,842)
  Reduction in long-term debt                         (3,000)             0         (7,469)             0 
  Increase (decrease) in bank overdraft                    0         22,919              0          2,942 
                                                -------------  -------------  -------------  -------------
    Net cash provided by (used in)
    financing activities                              (3,000)        20,574        417,531       (160,900)

    Net increase (decrease) in cash                   49,469        (25,423)       315,056        (49,044)

Cash at beginning of period                                0         31,165        364,525         56,786 
                                                -------------  -------------  -------------  -------------

Cash at end of period                           $     49,469   $      7,742   $     49,469   $      7,742 
                                                =============  =============  =============  =============

</TABLE>



See  Notes  to  Financial  Statements


<PAGE>
                            PENN OCTANE CORPORATION

                         NOTES TO FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.          BASIS  OF  PRESENTATION

The  balance  sheet  as of January 31, 1997, the statements of operations, and
statements  of  cash flows for the three and six months ended January 31, 1997
and 1996 have been prepared by Penn Octane Corporation (the "Company") without
audit.      In the opinion of management, the financial statements include all
adjustments  (which  include  only  normal recurring adjustments) necessary to
present  fairly  the financial position as of January 31, 1997 and the results
of  operations  and  cash flows for the three and six months ended January 31,
1997  and  1996.

Certain  information  and  footnote disclosures normally included in financial
statements  prepared  in  accordance  with  generally  accepted  accounting
principles  have  been  omitted.  These financial statements should be read in
conjunction  with  the  financial statements and notes thereto included in the
Company's    Form  10-KSB for the year ended July 31, 1996 and Form 10-QSB for
the  quarter  ended  October  31,  1996.

Certain  reclassifications have been made to prior year balances to conform to
the  current  presentation.    All  reclassifications  have  been  applied
consistently  to  the  periods  presented.

2.          EARNINGS  (LOSS)  PER  COMMON  SHARE

Earnings    (loss) per share of common stock is computed based on the weighted
average  number  of  shares  outstanding  after  giving effect to common stock
equivalents.   Fully diluted earnings (loss) per share of common stock assumes
the  conversion of preferred stock and is only presented in periods where such
computation results in dilution greater that 3% of primary earnings (loss) per
share  of  common  stock.

3.          COMMITMENTS  AND  CONTINGENCIES

During  1994,  the Company entered into discussions with International Bank of
Commerce-Brownsville,  a Texas state banking association (IBC), for a proposed
letter  of  credit, term loan, and working capital financing.  In anticipation
of  receiving  funding,  the  Company  executed  various documents including a
Security  Agreement  dated  July  1,  1994,  assigning  and  granting to IBC a
security  interest  in substantially all of the Company's business and assets,
including  its  pipeline  lease  agreement,  its  leased  land  at the Port of
Brownsville,  its  terminal  facilities and related equipment, inventories and
all  contracts  and  accounts  receivable.

Beginning  July 1, 1994, IBC advanced to the Company directly or made payments
directly  to  certain of the Company's creditors a total of $1,507,552 against
the collateral.  On August 5, 1994, IBC notified the Company that it would not
honor  certain  of  the  Company's  checks  but  would  continue  to honor its
irrevocable  letters  of  credit  issued  on  behalf  of  the  Company.

On  August 24, 1994 the Company filed an Original Petition and Application for
Injunctive  Relief  against  IBC  seeking:  (1) either enforcement of a credit
facility  between the Company and IBC or a release of the Company's collateral
consisting  of  significantly  all  of  the Company's business and assets; (2)
declaratory  relief  with respect to the credit facility; and (3) an award for
damages  and  attorney's  fees.

In response to the Company's request for injunctive relief, IBC filed a motion
on  August  29,  1994  to  compel arbitration and to stay the proceedings.  On
September 12, 1994, a State District Court in Cameron County, Texas, signed an
order  compelling  the  Company and IBC to resolve all of the Company's claims
against  IBC  in final arbitration.  The arbitration was conducted through the
American  Arbitration Association, Commercial Arbitration No. B 70 148 0133 94
A.

On  November  3, 1994, IBC filed a Responsive Pleading in Arbitration alleging
that  there  was  no loan agreement between the Company and IBC.  In addition,
IBC  requested  that  the  arbitrators  declare that IBC was not liable to the
Company  as  alleged, and that IBC was entitled to an award of $25,000,000 for
Business  Disparagement/Defamation  and  $100,000,000 in Punitive Damages plus
reasonable  attorney's  fees.

On  November  7,  1994,  the  Company  and  IBC agreed to a partial release of
certain  collateral  (accounts  receivable)  after the Company made cumulative
payments  through  that  date  to IBC totaling $800,000.  The remaining unpaid
balance to IBC at that date totaled $672,552, excluding interest ($30,448) and
fees  ($39,853).

On  May  5, 1995, IBC filed a First Amended Responsive Pleading in Arbitration
again  alleging  there  was  no loan agreement between the Company and IBC and
requesting  damages  in  excess  of  $750,000  plus  $3,500,000  for  Business
Disparagement/Defamation  plus  an amount of Punitive Damages to be determined
by  the  trier  of  fact.

The  arbitration  hearing,  held  before a panel of three neutral arbitrators,
commenced  on  July 19, 1995, and concluded on August 2, 1995.  On October 10,
1995,  the  Company  received notification of the Award of Arbitrators (Award)
which  called  for  IBC  to  pay  to the Company the sum of (a) $3,246,754 for
Breach  of  Contract  and  (b)  attorneys' fees of $568,000.  In addition, the
Award stated that IBC was entitled to an offset of (a) the sum of $804,016 and
(b)  attorneys' fees of $200,000 on IBC's counterclaim against the Company for
Breach  of Contract.  Both parties' awards accrue post-award interest at 9.75%
compounded  annually.

On  February  28,  1996, after hearing and denying IBC-Brownsville's motion to
vacate  the  arbitration  award,  the  following  judgment  was  ordered:

International  Energy  Development  Corporation  n/k/a Penn Octane Corporation
shall  have  a  judgment against International Bank of Commerce-Brownsville in
the  sum of $2,810,737, plus post-award interest at a rate of 9.75% compounded
annually  to begin running 10 days after the date this award was signed by the
requisite  number  of  arbitrators  (September  21, 1995) to the entry of this
Judgment  and  thereafter  at  the  statutory  rate  (10%).

Upon  the  entry  of  this Judgment International Bank of Commerce-Brownsville
shall  release  all  collateral  transferred  to  it  by  International Energy
Development  Corporation  n/k/a  Penn  Octane  Corporation.

The  Court  further  orders  that International Energy Development Corporation
n/k/a  Penn  Octane Corporation shall have and recover from International Bank
of  Commerce-Brownsville  attorneys'  fees in the sum of $100,000 for services
rendered  in  pursuing  the  entry  of  Judgment  in  this case, together with
interest  at the statutory rate from date of entry of this Judgment until paid
and conditionally $7,500 for any appeal to the Court of Appeals and $5,000 for
any  appeal to the Texas Supreme Court and $2,500 in the event Writ is granted
by  the  Supreme  Court.

On June 3, 1996, IBC-Brownsville filed an appeal, but the Company continues to
believe  that the judgment is final, binding, collectible and will resolve the
litigation  with IBC-Brownsville.  The financial statements do not include any
adjustments  reflecting  the  gain  contingency (the Award), net of attorneys'
fees,  or  the  offset  (principal  and  interest).    Short-term borrowing of
$672,552  reflects  the  principal  amount  of  the offset.  The Award will be
accounted  for  when  it is actually realized and the offset will be accounted
for  at  such  time  as  IBC-Brownsville  has  exhausted  all  appeals.

On  April 18, 1996, the Company reached agreement to accept $400,000 to settle
a  lawsuit  it filed in October 1995 against a bank related to IBC-Brownsville
(related  Bank).    As  part of the settlement agreement, the parties executed
mutual  releases from future claims related to the IBC-Brownsville litigation.
Additionally,  the  defendant  provided  an indemnity agreement to the Company
against  future  claims  from  IBC-Brownsville.  The amount is recorded in the
statement  of  operations  for  the  year  ended  July  31,  1996.

On  June  26,  1996,  IBC-Brownsville filed suit against the Company, Case No.
96-06-3502  in  the  357th  Judicial District Court of Cameron County alleging
that  the  Company, in filing the judgment against IBC-Brownsville in order to
clear  title  to  its  assets,  slandered  the  name  of  IBC-Brownsville.
IBC-Brownsville  contends  that  the Company's judgment against them prevented
them  from  selling  certain  property.    IBC-Brownsville  has claimed actual
damages  of  $600,000  and  requested  punitive  damages  of  $2,400,000.   On
September  23,  1996,  the  court  which entered the judgment on behalf of the
Company  indicated  in a preliminary ruling that the Company was privileged in
filing  the  judgment  to clear title to its assets.  The Company believes the
case  to be frivolous and is a breach of the settlement agreement entered into
with  the related Bank.  Further, the Company believes this cause of action is
covered  by  an  indemnity  agreement  from  that  related  Bank.

In  connection  with the IBC-Brownsville suit, IBC-Brownsville filed an appeal
with the Texas Court Of Appeals on January 21, 1997.  The Company responded on
February  14,  1997.

4.          PURCHASE  COMMITMENT

On September 26, 1996, the Company entered into a Term Sale Agreement with its
main  propane  supplier.   The agreement is for a one year period beginning on
October  1,  1996.   The terms of this agreement, such as pricing and volumes,
mirror  the  terms  of  the Company's sales agreement with its major customer.

5.          LETTERS  OF  CREDIT

In  January  of 1996, the Company obtained a standby letter of credit in favor
of  a  propane  supplier.    The  standby letter of credit was for $40,000 and
expired  December  1, 1996.  In August of 1996, the Company obtained a $40,000
standby  letter  of credit for another supplier.  The letter of credit expired
on  September  30,  1996.

In  accordance  with  the purchase commitment discussed above, in September of
1996  the  Company  obtained  a $625,000 letter of credit in favor of its main
propane  supplier.    As  part  of  the terms and conditions of this letter of
credit,  which  was  due  to expire September 30, 1997, the Company executed a
$625,000  demand  promissory note to the issuing bank.  The note was initially
collateralized  by  a  $500,000  deposit,  accrues  interest at the prime rate
(8.25%  as  of  October  31, 1996) plus 3%, and is guaranteed by the Company's
president.

On November 5, 1996, the Company's main propane supplier presented for payment
$495,315.10,  which  was  paid  through  the initial collateral deposit.  As a
result of the this draw down, the balance available under the letter of credit
remained  $625,000,  and  $4,685  represented  the  remaining  balance  of the
collateral  deposit.  In early March 1997, the letter of credit and collateral
was  released.

In December 1995, the Company obtained a revolving line of credit for $140,000
which  was  renewed  in December 1996 through September 30, 1997.  Interest is
calculated  on this credit line at the prime rate (8.25% during the six months
ended January 31, 1997) plus 3%.  At January 31, 1997, the outstanding balance
was  $100,000,  which  is  reflected  in  short-term  borrowings.

6.          LONG-TERM  DEBT

During  October,  1996,  the  Company  issued 6.5 units in a private placement
totaling  $325,000 (the "Units").  Each Unit consists of (i) a Promissory Note
and  (ii)  Common  Stock  Purchase Warrants (the "Warrants") to purchase Fifty
Thousand  (50,000)  Shares of Common Stock (the "Common Stock") of the Company
at  an  exercise  price  of  $3.00  per  share.

The  Promissory  Notes  accrue  interest  at  10%  annually and are payable on
November  7,  1997 (the "Payment Date").  In the event the Company receives in
excess of two hundred fifty thousand ($250,000) dollars in connection with any
offering  of  its  securities  prior  to  the  Payment Date, the Company shall
utilize  up  to  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,  the  Company shall pay the balance due on the Payment Date.

7.          COMPRESSED  NATURAL  GAS:

     WILSON  ACQUISITION  CORPORATION

In  connection  with  the  Company's plans to enter the compressed natural gas
("CNG")  refueling  business, on March 7, 1997, Wilson Acquisition Corporation
("WAC"),  a  newly  formed  wholly-owned subsidiary of the Company, and Wilson
Technologies  Incorporated.  ("Wilson"),  a  leading supplier of CNG refueling
stations  which  is  engaged  in  the  business  of  selling,  designing,
manufacturing,  installing  and  servicing  CNG refueling stations and related
products  for use in the CNG industry throughout the world, had entered into a
Interim  Operating  Agreement  ("Arrangement").    Under  the  terms  of  the
Arrangement,  effective as of February 17, 1997, WAC will be granted the right
to  use  the  Wilson  name,  technology  and  employees,  subject  to  certain
restrictions,  as  well  as  rights  to  perform  contracts  which  Wilson has
currently  not  begun to perform, in exchange for monthly payments of $84,000,
and  royalty  payments  of  5% on gross revenues.  WAC will be entitled to all
revenues  earned  by  WAC and by certain businesses of Wilson commencing as of
February  17,  1997.  In addition, Zimmerman Holdings Inc. ("ZHI"), the parent
of  Wilson,  has  agreed to reimburse the Company for 50% of the net operating
cash  deficit  of  WAC,  if  any.  WAC will also be entitled to use the Wilson
premises as well as available inventory of Wilson in carrying out the business
at a price of cost plus 10%.  The Arrangement will terminate on the earlier to
occur  of  90  days  from  the  date  of the Arrangement or the closing of the
Acquisition  described  below.   If the Acquisition is not completed within 90
days,  the  Arrangement  may  be  extended  by  WAC  for  up  to  three years.

Simultaneously with Arrangement, the Company, WAC, Wilson and ZHI entered into
a  purchase  agreement  (the  "Acquisition"), whereby WAC will acquire certain
assets,  including  trademarks and licenses, and certain ongoing businesses of
Wilson,  including Wilson's Canadian and Mexican subsidiaries, in exchange for
the assumption of certain liabilities, a $3 million contingent royalty note of
WAC, a note based upon certain operating expenses issued by WAC and a $220,000
convertible  debenture  issued  by  the Company. The Acquisition is subject to
several  conditions,  including obtaining satisfactory restructuring of all of
Wilson's  creditor  obligations involving the consent of such creditors to the
proposed  Acquisition.

DINA  DEALERSHIP

In  November  1996,  the  Company acquired the right to a Dina dealership (the
"Dealership")  which  was  conditionally  granted  to  Mr.  Roberto  Keoseyan
("Keoseyan")  by  Grupo  Dina,  S.A. de C.V., one of the largest bus and truck
manufacturers  in  Mexico.    In  connection with the acquisition, the Company
agreed  to  make  certain monthly payments to Keoseyan and has agreed to issue
Keoseyan  100,000  warrants  in  the  common  stock  of  the  Company once the
Dealership  has  been  officially  granted  to  the  Company.

8.          EQUITY

WARRANT  EXCHANGE

During February  1997, the Company and certain prior officers the ("Officers")
of the Company agreed to an exchange offer whereby the Officers, on a weighted
average  basis,  received newly issued shares of the Company's common stock in
exchange  for  outstanding warrants tendered (the "Exchange").  As a result of
the  Exchange,  the Company will issue a total of 164,286 shares of its common
stock  in  exchange  for  receipt  of  702,856  warrants.


















PART  I  -  ITEM  2

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION

RESULT  OF  OPERATIONS

Revenue  for  the  three  months  ended  January  31,  1997 was $13,513,164 as
compared  to  $6,716,715  for  the  three  months  ended  January 31, 1996, an
increase  of  101%.  The increase for the three months ended January 31, 1997,
was  due to the Company's first full quarter of operations under the new sales
arrangement  with a major customer, which commenced during October 1996, which
resulted  in  higher  volumes  of  product  sold during the three months ended
January  31,  1997  of  approximately  22.6 million gallons sold compared with
approximately 16.9 million gallons sold for the three months ended January 31,
1996.   In addition, the prices charged for product sold were generally higher
during the three months ended January 31, 1997 as compared to the three months
ended January 31, 1996.  For the six months ended January 31, 1997 as compared
to  the  six months ended January 31, 1996,  revenues increased to $16,059,657
from  $12,273,507,  an  increase  of  31%.  This increase was primarily due to
generally  higher  prices charged for product sold during the six months ended
January  31,  1997  as  compared  to  the  six  months ended January 31, 1996,
partially  offset  by  lower  volumes  sold.

Cost of goods sold for the three months ended January 31, 1997 was $12,728,248
as  compared  to  $6,327,356  in  the  same  quarter during the prior year, an
increase  of  101%.    As described earlier, this increase is primarily due to
additional  volumes  sold  as well as higher costs for product sold during the
three  months  ended  January  31,  1997, partially offset from utilization of
lower  priced  inventory.  Cost of goods sold for the six months ended January
31,  1997  was $15,481,213 as compared to $11,592,906 for the six months ended
January  31, 1996, an increase of 34%.  As described earlier, this increase is
primarily  due  to  higher  costs for product sold during the six months ended
January  31,  1997,  partially  offset  by  lower  volumes  sold.

Gross  profit  for  the  three  months  ended January 31, 1997 was $784,916 as
compared  to  $389,359  for  the  three  months  ended  January 31, 1996.  The
increase  was  due  primarily  to the higher volume of LPG gas sold during the
three  months ended January 31, 1996, as a result of the new sales arrangement
with  a major customer described above.  Gross profit for the six months ended
January 31, 1997 was $578,444 as compared to $680,601 for the six months ended
January  31,  1996.    The  decrease was due primarily to lower margins earned
under  the  new  sales  arrangement  with  a  major customer combined with the
continuation  of certain fixed costs which was not affected by the significant
reduction  in  volumes  sold during the period until the new sales arrangement
with  a  major  customer  commenced  during  October  1996.

Selling, general and administrative (SG&A) expenses for the three months ended
January 31, 1997 were $466,011 as compared to $395,097 for the same quarter in
the  prior  year,  an  increase  of  18%.   This increase was due primarily to
increases  in  administrative  costs.   SG&A expenses for the six months ended
January  31,  1997  were  $893,200  as compared to $721,074 for the six months
ended  January  31, 1996, an increase of 24%.  This increase was due primarily
to  increases  in  administrative  costs.

Interest  expense  was  $69,879 and $63,501 for the three months ended January
31,  1997,  and  January  31,  1996, respectively.  The minor increase was due
primarily  to  higher  average  loan  balances  during  the three months ended
January    31,  1997,  partially  offset  from  payments  of  contractor  loan
obligations.    Interest  expense was $123,506 and $117,862 for the six months
ended  January  31,  1997,  and  January  31,  1996,  respectively.  The minor
increase  was  due  primarily  to  higher average loan balances during the six
months  ended  January  31, 1997, partially offset from payments of contractor
loan  obligations.

Due to the net losses for the six months ended January 31, 1997, no income tax
expense  was  provided.

In  July  1995, due to uncertainties related to the timing of the financing of
National Power Exchange Group, Inc.'s (NPEG) power project, the Company made a
provision to reduce the amount due under the settlement agreement.  During the
six months ended January 31, 1996, the Company received approximately $200,000
in  connection  with  the  settlement  agreement.  For additional information,
please  refer  to  note M of the Company's form 10-KSB for the year ended July
31,  1996.

LIQUIDITY  AND  CAPITAL  RESOURCES

At  July  31, 1996, the Company's arrangement with its major customer expired.
After  two  months  of negotiation, an agreement was reached.  The term of the
new  agreement  is  for  a  one year period commencing October 1, 1996.  Under
terms  of this agreement, the Company has committed to supply and the customer
has  committed  to  purchase  a minimum volume of LPG each month with seasonal
variability.  The total committed annual volume exceeds the volume sold to the
customer  during  the  year  ended  July  31,  1996.

Under this agreement, the Company is again responsible for the direct purchase
of  LPG.    As  a result, the Company has negotiated an agreement with a major
supplier  which  mirrors  the  terms  and  conditions  of  the Company's sales
agreement  with its primary customer.  The agreements provide the Company with
a  fixed  margin over the cost of gas.  The Company has made arrangements with
its  bank  for  a standby letter of credit for the benefit of a major supplier
for  the one year period of the agreements.  This letter of credit will enable
the  Company  to  purchase  LPG on an ongoing basis.  As part of the terms and
conditions  of this letter of credit, the Company executed a demand promissory
note, which accrues interest at the prime rate plus 3%, is collateralized by a
bank  deposit  and  is  guaranteed  by  the  president.

Since  the  Company agreed to finance the purchase of LPG, the customer agreed
to  prepay  for  approximately 75% of the gallons committed to be purchased in
October  1996,  and  to make payments within ten days of invoicing thereafter.
Under  the  terms  of  the  agreement,  invoicing will occur weekly and should
reduce  the  Company's  working capital requirements substantially.  Beginning
November  1996,  the  Company has made arrangements with its major customer to
guarantee  credit  with  the  Company's  main  supplier.

Because  the  Company  had complied with all terms of the settlement agreement
entered  into on June 21, 1995 with the two contractors, Lauren and Janik, who
were  owed  money from the construction of the Company's terminal, and because
the  Company  had  reduced  the amount owed the contractors from $1,308,000 to
$437,834 as of July 1996, on October 10, 1996, the Company reached a tentative
agreement  with Lauren and Janik to extend the repayment schedule to April 14,
1997,  under substantially similar terms and conditions.  Based on the minimum
volumes  committed  to  by  the Company's primary customer under the agreement
which commenced on October 1, 1996, the Company anticipates being able to make
repayment  in  full  from  cash  flow  generated  by  operations.

While the Company has not made commitments for additional capital expenditures
during  the  next  twelve  months,  it  continues  to evaluate the cost of and
opportunities  created  by  (i)  installing  a  cooling unit and upgrading and
extending a pipeline to the loading dock on the Brownsville Navigation Channel
in  order  to commence unloading from and loading onto ocean-going LPG vessels
and  (ii)  the  construction  and operation of an additional LPG terminal with
storage  facilities  within  Mexico  and/or  closer  to  U.S.-  Mexico  border
crossings  and an extension of the pipeline to this terminal, which is subject
to  regulatory  approval.    If determined to be advantageous to the Company's
operations, the projects would enable the Company to receive LPG for its major
customer  for  storage and redelivery, export LPG to Caribbean and other Latin
American  markets and allow for additional sales volumes of LPG into Mexico at
substantially  higher  margins.  The total cost of these projects are expected
to  cost  less  than  $5,000,000.

In  connection  with  the  Company's plans to enter the compressed natural gas
("CNG")  refueling  business, on March 7, 1997, Wilson Acquisition Corporation
("WAC"),  a  newly  formed  wholly-owned subsidiary of the Company, and Wilson
Technologies  Incorporated.  ("Wilson"),  a  leading supplier of CNG refueling
stations  which  is  engaged  in  the  business  of  selling,  designing,
manufacturing,  installing  and  servicing  CNG refueling stations and related
products  for use in the CNG industry throughout the world, had entered into a
Interim  Operating  Agreement  ("Arrangement").    Under  the  terms  of  the
Arrangement,  effective as of February 17, 1997, WAC will be granted the right
to  use  the  Wilson  name,  technology  and  employees,  subject  to  certain
restrictions,  as  well  as  rights  to  perform  contracts  which  Wilson has
currently  not  begun to perform, in exchange for monthly payments of $84,000,
and  royalty  payments  of  5% on gross revenues.  WAC will be entitled to all
revenues  earned  by  WAC and by certain businesses of Wilson commencing as of
February  17,  1997.  In addition, Zimmerman Holdings Inc. ("ZHI"), the parent
of  Wilson,  has  agreed to reimburse the Company for 50% of the net operating
cash  deficit  of  WAC,  if  any.  WAC will also be entitled to use the Wilson
premises as well as available inventory of Wilson in carrying out the business
at a price of cost plus 10%.  The Arrangement will terminate on the earlier to
occur  of  90  days  from  the  date  of the Arrangement or the closing of the
Acquisition  described  below.   If the Acquisition is not completed within 90
days,  the  Arrangement  may  be  extended  by  WAC  for  up  to  three years.

Simultaneously with Arrangement, the Company, WAC, Wilson and ZHI entered into
a  purchase  agreement  (the  "Acquisition"), whereby WAC will acquire certain
assets,  including  trademarks and licenses, and certain ongoing businesses of
Wilson,  including Wilson's Canadian and Mexican subsidiaries, in exchange for
the assumption of certain liabilities, a $3 million contingent royalty note of
WAC, a note based upon certain operating expenses issued by WAC and a $220,000
convertible  debenture  issued  by  the Company. The Acquisition is subject to
several  conditions,  including obtaining satisfactory restructuring of all of
Wilson's  creditor  obligations involving the consent of such creditors to the
proposed  Acquisition.

WAC  currently  intends  to pursue additional service and maintenance business
and  other  station  development  opportunities  in the U.S., Mexico and other
countries.

During  October  1996, the Company completed a private placement of Promissory
Notes due November 1997.  Total proceeds raised from the private placement was
$325,000  of  which  the  Company  used  the  net proceeds for working capital
requirements.

Although  IBC-Brownsville  has  appealed the judgment, the court which entered
the  judgment  issued  an order on September 23, 1996, which provides that the
Company  has  the  right  to  enter  the  judgment  and  free  its assets from
encumbrance.   Management of the Company believes that receipt of the proceeds
from  the  judgment  against  IBC-Brownsville  would  enable  the  Company  to
substantially  eliminate all of its outstanding obligations including all debt
and  legal fees plus provide additional working capital.  At January 31, 1997,
the judgment including accrued interest and legal fees approximate $3,302,511,
less  contingent  legal  fees.

Effective  October  24,  1996,  Thomas  P.  Muse,  Chairman,  Mark D. Casaday,
President,  and  Thomas  A.  Serleth,  Executive  Vice  President,  Secretary,
Treasurer,  and  Chief  Financial  Officer resigned as members of the Board of
Directors  and  Officers  of  the Company.  Mr. Casaday continued as President
until  the  expiration  of  his  employment  contract  on  October  31,  1996.

Effective  October 29, 1996, Jerome B. Richter was elected to the positions of
Chairman of the Board of Directors, President and Chief Executive Officer, Ian
T.  Bothwell  was  elected  Vice President, Treasurer, Assistant Secretary and
Chief  Financial  Officer,  and  Jorge  Bracamontes was elected Executive Vice
President  and  Secretary.

Through  a combination of the agreements with its major customer to purchase a
minimum  monthly  volume  of  LPG  and  its  primary  LPG  supplier to provide
increased  volumes  of LPG, and a full year of sales to U.S. Rio Grande Valley
propane  distributors, the Company believes it will have cash flow adequate to
meet  its  obligations  for  the  next  twelve month period.  In addition, the
Company  expects  collection  of  the IBC-Brownsville judgment, and intends to
expand  sales  to  its  major  customer,  including  related  products  and/or
additional  services.



<PAGE>
PART  II          OTHER  INFORMATION

ITEM  1.          LEGAL  PROCEEDINGS

See  Note  3  to  the  Financial  Statements.

ITEM  2.          CHANGES  IN  SECURITIES.

     None.

ITEM  3.          DEFAULTS  UPON  SENIOR  SECURITIES.

     None.

ITEM  4.          SUBMISSION  OF  MATTERS  TO  A  VOTE  OF SECURITIES HOLDERS.

     None.

ITEM  5.          OTHER  INFORMATION.

     None.

ITEM  6.          EXHIBITS  AND  REPORTS  ON  FORM  8-K.

The  following  Exhibits  are  included  herewith:

a.          Exhibits
            --------

10.23        Interim  Operating  Agreement  between  the  Wilson  Acquisition
Corporation  and  Wilson  Technologies  Incorporated  dated  March  7,  1997.

10.24        Purchase  Agreement  between  the  Registrant, Wilson Acquisition
Corporation,  Wilson  Technologies  Incorporated  and  Zimmerman Holdings Inc.
dated  March  7,  1997.

10.25    Agreement for Exchange of Warrants for Common Stock dated February 5,
1997  between  the  Registrant  and  Mark  D.  Casaday.

10.26    Agreement for Exchange of Warrants for Common Stock dated February 5,
1997  between  the  Registrant  Thomas  P.  Muse.

10.27       Agreement for Exchange of Warrants for Common Stock dated February
19,  1997  between  the  Registrant  and  Thomas  A.  Serleth.

10.28     Agreement between Roberto Keoseyan and the Registrant dated November
12,  1996.

10.29        Promissory  Note  between  Bay Area Bank and the Registrant dated
December  20,  1996.

27.0          Financial  Data  Schedule


The  following  report  on  Form  8-K  is  incorporated  herein  by reference:


b.                  Reports  on  Form  8-K
                    ----------------------

            On  February  7,  1997,  the  Registrant  filed a Form 8-K Current
Report  regarding  the  press
            release  of  February  4,  1997 in connection with an agreement to
supply  CNG  buses  and
            refueling  stations.










































                                  SIGNATURES


     Pursuant  to the requirements of the Securities Exchange Act of 1934, the
registrant  has  duly  caused  this  report  to be signed on its behalf by the
undersigned  thereunto  duly  authorized.



                                 PENN OCTANE CORPORATION




Date:  March  14,  1997          By: /S/ IAN  T.  BOTHWELL
                                     ---------------------
                                         Ian  T.  Bothwell
                                         Vice  President  and
                                         Chief  Financial  Officer