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                                                                    Exhibit 10.2

                             PENN OCTANE CORPORATION

                                2001 WARRANT PLAN

1.   PURPOSES OF THE PLAN. The purposes of the 2001 Warrant Plan ("Plan") of
Penn Octane Corporation, a Delaware corporation ("Company"), are to:

     -    Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;

     -    Encourage selected employees, directors and consultants to accept or
continue employment or association with the Company and/or its affiliates; and,

     -    Increase the interest of selected employees, directors and consultants
in the Company's welfare through participation in the growth in value of the
common stock of the Company ("Common Stock").

     Warrants granted under this Plan ("Warrants") are not intended to satisfy
the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder ("Code").

2.   ELIGIBLE PERSONS. Every person who, at the date of grant of a Warrant, is
an employee of the Company or of any Affiliate (as defined below) of the Company
is eligible to receive Warrants under this Plan. Every person who, at the date
of grant, is a consultant to, or non-employee director of, the Company or any
Affiliate (as defined below) of the Company is eligible to receive Warrants
under this Plan. The term "Affiliate" as used in the Plan means a parent or
subsidiary corporation as defined in the applicable provisions (currently
Sections 424(e) and (f), respectively) of the Code. The term "employee" includes
an officer or director who is an employee of the Company. The term "consultant"
includes persons employed by, or otherwise affiliated with, a non-individual
consultant.

3.   STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS. Subject to the
provisions of Section 6.8 of this Plan, the total number of shares of stock
which may be issued under warrants granted pursuant to this Plan shall not
exceed 1,500,000 shares of Common Stock. The shares covered by the portion of
any grant under the Plan which expires before it is exercised shall become
available again for grants under the Plan.

4.   PLAN ADMINISTRATION.

     4.1  PLAN ADMINISTRATOR. The Plan shall be administered by the Board of
Directors of the Company ("Board") or by the Company's Compensation Committee
("Committee") to which administration of the Plan, or of part of the Plan, is
delegated by the Board (in either case, the "Administrator"). The foregoing
notwithstanding, the Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper and the Board, in its
absolute discretion, may at any time and from time to time exercise any and all
rights and duties of the Administrator under the Plan.


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     4.2  ADMINISTRATOR AUTHORITY. Subject to the other provisions of this Plan,
the Administrator shall have the authority, in its discretion: (i) to grant
Warrants; (ii) to determine the fair market value of the Common Stock subject to
Warrants; (iii) to determine the exercise price of Warrants granted; (iv) to
determine the persons to whom, and the time or times at which, Warrants shall be
granted, and the number of shares subject to each Warrant; (v) to interpret this
Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to
this Plan; (vii) to determine the terms and provisions of each Warrant granted
(which need not be identical), including but not limited to, the time or times
at which Warrants shall be exercisable; (viii) with the consent of the holder,
to modify or amend any Warrant; (ix) to defer (with the consent of the holder)
the exercise date of any Warrant; (x) to authorize any person to execute on
behalf of the Company any instrument evidencing the grant of a Warrant; and (xi)
to make all other determinations deemed necessary or advisable for the
administration of this Plan. The Administrator may delegate nondiscretionary
administrative duties to such employees of the Company as it deems proper.

     4.3  ADMINISTRATOR DETERMINATIONS. All questions of interpretation,
implementation, and application of this Plan shall be determined by the
Administrator. Such determinations shall be final and binding on all persons.

5.   GRANTING OF WARRANTS; WARRANT AGREEMENT.

     5.1  TERM OF PLAN. No Warrants shall be granted under this Plan after 10
years from the date of adoption of this Plan by the Board.

     5.2  WARRANT AGREEMENTS. Each Warrant shall be evidenced by a written
warrant agreement ("Warrant Agreement"), in form satisfactory to the
Administrator, executed by the Company and the person to whom such Warrant is
granted.

     5.3  FUTURE RELATIONSHIPS. The Administrator may approve the grant of
Warrants under this Plan to persons who are expected to become employees,
directors or consultants of the Company, but are not employees, directors or
consultants at the date of approval, and the date of approval shall be deemed to
be the date of grant unless otherwise specified by the Administrator.

6.   TERMS AND CONDITIONS OF WARRANTS.

     6.1.  WARRANT GRANT DATE. The date of grant of a Warrant under this Plan
shall be the date as of which the Administrator approves the grant.

     6.2.  WARRANT TERM. No Warrant shall be exercisable more than 10 years
after the date of grant, or such lesser period of time as is set forth in the
Warrant Agreement (the end of the maximum exercise period stated in the Warrant
Agreement is referred to in this Plan as the "Expiration Date").

     6.3.  TIME OF WARRANT EXERCISE. Subject to Section 5, Warrants granted
under this Plan shall be exercisable (a) in accordance with a schedule as may be
set by the Administrator and specified in the Warrant Agreement relating to such
Warrant, or (b) if no schedule is specified in


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the Warrant Agreement, immediately as of the effective date of the Warrant
Agreement granting the Warrant. In any case, no Warrant shall be exercisable
until a Warrant Agreement in form satisfactory to the Company is executed by the
Company and the holder. Notwithstanding the foregoing, at any time after grant
of a Warrant, the Committee or the Board may, in its sole discretion and subject
to whatever terms and conditions it selects, accelerate the period during which
such Warrant vests.

     6.4.  EXERCISE PRICE. The exercise price of a Warrant shall be not less
than 100% of the fair market value of the stock subject to the Warrant on the
date of grant. If the stock of the Company is regularly quoted by a recognized
securities dealer, and selling prices are reported, its fair market value shall
be the closing price of such stock on the date the value is to be determined,
but if selling prices are not reported, its fair market value shall be the mean
between the high bid and low asked prices for such stock on the date the value
is to be determined (or if there are no quoted prices for the date of grant,
then for the last preceding business day on which there were quoted prices). In
the absence of an established market for the stock, the fair market value
thereof shall be determined in good faith by the Administrator, with reference
to the Company's net worth, prospective earning power, dividend-paying capacity,
and other relevant factors, including the goodwill of the Company, the economic
outlook in the Company's industry, the Company's position in the industry, the
Company's management, and the values of stock of other corporations in the same
or a similar line of business.

     6.5.  PAYMENT. Payment in full, in cash, shall be made for all stock
purchased at the time written notice of exercise of a Warrant is given to the
Company, and proceeds of any payment shall constitute general funds of the
Company.

     6.6.  WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise of a
Warrant and as a condition thereto, or at such other time as the amount of such
obligations becomes determinable, the holder shall remit to the Company in cash
all applicable statutory taxes, including but not limited to federal and state
withholding and employment taxes. Such obligation to remit may be satisfied, if
authorized by the Administrator in its sole discretion, after considering any
tax, accounting and financial consequences, by the holder's (i) delivery of a
promissory note in the required amount on such terms as the Administrator deems
appropriate, (ii) tendering to the Company previously owned mature shares (as
defined in Section 6.1.6(b) above) of Stock or other securities of the Company
with a fair market value equal to the required amount, or (iii) agreeing to have
shares of Common Stock (with a fair market value equal to the required amount)
which are acquired upon exercise of the Warrant withheld by the Company.

     6.7.  NONTRANSFERABILITY OF WARRANT RIGHTS. Except with the express written
approval of the Administrator which approval the Administrator is authorized to
give only with respect to Warrants, no Warrant granted under this Plan shall be
assignable or otherwise transferable by the holder except by will or by the laws
of descent and distribution. During the life of the holder, a Warrant shall be
exercisable only by the holder.

     6.8.  CHANGES IN CAPITAL STRUCTURE. Subject to Section 6.2, if the stock of
the Company is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, combination or reclassification, appropriate
adjustments shall be made by the


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Board in (a) the number and class of shares of stock subject to this Plan and
each Warrant outstanding under this Plan, and (b) the exercise price of each
outstanding Warrant; provided, however, that the Company shall not be required
to issue fractional shares as a result of any such adjustments. Each such
adjustment shall be subject to approval by the Board in its sole discretion.

     6.9.  CORPORATE TRANSACTIONS. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each holder at least
30 days prior to such proposed action. To the extent not previously exercised,
all Warrants will terminate immediately prior to the consummation of such
proposed action; provided, however, that the Administrator, in the exercise of
its sole discretion, may permit exercise of any Warrants prior to their
termination, even if such Warrants were not otherwise exercisable, subject to
applicable limitations under Section 409A of the Code. In the event of a merger
or consolidation of the Company with or into another corporation or entity in
which the Company does not survive, or in the event of a sale of all or
substantially all of the assets of the Company in which the shareholders of the
Company receive securities of the acquiring entity or an affiliate thereof, all
Warrants shall be assumed or equivalent warrants shall be substituted by the
successor corporation (or other entity) or a parent or subsidiary of such
successor corporation (or other entity); provided, however, that if such
successor does not agree to assume the Warrants or to substitute equivalent
warrants therefor, the Administrator, in the exercise of its sole discretion,
may permit the exercise of any of the Warrants prior to consummation of such
event, even if such Warrants were not otherwise exercisable, subject to
applicable limitations under Section 409A of the Code.

     6.10. OTHER PROVISIONS. Each Warrant granted under this Plan may contain
such other terms, provisions, and conditions not inconsistent with this Plan as
may be determined by the Administrator.

7.   MANNER OF EXERCISE.

     7.1.  NOTICE AND PAYMENT. A holder wishing to exercise a Warrant shall give
written notice to the Company at its principal executive office, to the
attention of the officer of the Company designated by the Administrator,
accompanied by payment of the exercise price and withholding taxes, if any, as
provided in Sections 6.5 and 6.6. The date the Company receives written notice
of an exercise hereunder accompanied by payment of the exercise price will be
considered as the date such Warrant is exercised.

     7.2.  ISSUANCE OF STOCK. Promptly after receipt of written notice of
exercise of a Warrant and the payments called for by Section 7.1, the Company
shall, without stock issue or transfer taxes to the holder or other person
entitled to exercise the Warrant, deliver to the holder or such other person a
certificate or certificates for the requisite number of shares of stock. A
holder or permitted transferee of the Warrant shall not have any privileges as a
shareholder with respect to any shares of stock covered by the Warrant until the
date of issuance (as evidenced by the appropriate entry on the books of the
Company or a duly authorized transfer agent) of such shares.


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8.   CONDITIONS UPON ISSUANCE OF SHARES. Shares of Common Stock shall not be
issued pursuant to the exercise of a Warrant unless the exercise of such Warrant
and the issuance and delivery of such shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended ("Securities Act").

9.   NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan shall not be construed
as creating any limitations on the power of the Company to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of warrants other than under the Plan.

10.  AMENDMENTS TO PLAN. The Board may at any time amend, alter, suspend or
discontinue this Plan. Without the consent of a holder, no amendment,
alteration, suspension or discontinuance may adversely affect outstanding
Warrants. No amendment, alteration, suspension or discontinuance shall require
shareholder approval unless the Board determines that shareholder approval is
advisable.

11.  EFFECTIVE DATE OF PLAN; TERMINATION. This Plan shall become effective upon
adoption by the Board provided, however, that no Warrant shall be exercisable
unless and until written consent of the shareholders of the Company, or approval
of shareholders of the Company voting at a validly called shareholders' meeting,
is obtained within twelve months after adoption by the Board. If such
shareholder approval is not obtained within such time, Warrants granted
hereunder shall terminate and be of no force and effect from and after
expiration of such twelve-month period. Warrants may be granted and exercised
under this Plan only after there has been compliance with all applicable federal
and state securities laws. This Plan (but not Warrants previously granted under
this Plan) shall terminate within ten years from the date of its adoption by the
Board.


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