For several years, banks in the southwestern United States that have lent heavily to oil- and gas-related enterprises have been hoping for a rebound in energy prices that would put them and their borrowers back on the road to prosperity.

Instead, oil prices have begun a new, precipitous decline that threatens even worse times for the banks and their customers, especially the smaller exploration companies and the service firms that supply them with everything from drilling mud to meals.

Until the energy economy began to deteriorate in 1981 and 1982, many banks made loans in the belief that oil prices -- then about $35 a barrel -- would head nowhere but up.

Since then, many banks have taken steps to protect themselves against declines in oil prices -- either by requiring producers to increase collateral or forcing them to "dedicate" more of their oil revenue to paying their loans and less to new exploration.

"But banks can only protect themselves so much," as one bank executive put it. "A year ago, $20 a barrel was considered the panic price," he said. "A large number of banks took steps to protect themselves if prices hit $20 -- although [the] thinking then was that $23 was about as low as oil prices would go. There will be more pain and losses at $20, but it will be nothing like what you'll see if prices hit $15."

Spot oil prices plunged close to the $15 level early last week, but began to recover during the final three days. By Friday, the spot price for key Texas oil was $17.50 a barrel, $1.05 more than on Thursday, although below the nearly $19 it commanded a week earlier.

Last year, 34 banks failed in the key southwestern energy-producing states covered by the Dallas office of the Federal Deposit Insurance Corp., the federal agency that not only insures deposits but assumes the assets and liabilities of failed banks.

"I think you'll see that number and more fail if prices drop to the mid-teens for oil. At $15 or $16 a barrel, you'll see some sizable banks with $500 million to $1 billion in assets threatened," according to a former government official who knows the banking industry well.

The banks that have failed so far have been relatively small, with the exception of Continental Illinois National Bank. But the failures of small banks can help bring down bigger ones -- as Continental Illinois demonstrated. The nation's biggest banks are exposed to falling oil prices, more because of their loans to debt-ridden oil-producing countries such as Mexico and Nigeria than because of their ties to the domestic oil industry.

Most of the major bank loans made domestically have gone to rock-solid oil giants such as Exxon Corp. or Mobil Corp. that can make up the lower profits on crude oil with higher profits on refined products or to big, multibillion-dollar companies with the capacity to absorb lower prices.

American banks already have written off billions of dollars in bad oil and gas loans in the last four years, and have moved forcefully to reduce their exposure to the energy industry.

Bank regulators and bankers themselves say it is too early to predict the amount of damage that the decline in oil prices will do to the nation's banking system.

"It all depends on how fast and how far oil prices fall and how long they stay down there," according to the top energy lender at a major bank.

William Gibson, senior vice president at RepublicBank Corp. of Dallas said that the decline in oil prices is manageable for most Texas banks. He said that the bigger Texas banks have been steadily reducing the amount of energy loans in their portfolio over the last five years.

At Republic, about 12 percent of loans are energy-related. At other big banks such as MCorp and Allied Bankshares, the percentage is even smaller. But at InterFirst Corp. in Dallas, which rang up big energy losses, 16 percent of all outstanding loans are energy related. Texas Commerce Bankshares of Houston, which reported a $28.8 million loss in the final three months of last year because of energy-loan losses, has more than 18 percent of its loans in energy.

Five years ago, however, many of these same banks had one-fourth of their loans committed to the energy industry.

But smaller banks, which cannot diversify their lending as easily as the big Houston and Dallas banks, are more heavily involved in energy loans, and many of their nonenergy loans are to companies whose fortunes rise and fall with those of the oil and gas industry.

"When you're out there in West Texas, the grocery store is going to be in trouble if the roughnecks are out of work," a bank executive said.

At the other end of the spectrum, the nation's biggest banks have huge outstanding loans to oil-producing countries in the Third World that may have trouble repaying them. Mexico, for example, owes about $97 billion to foreigners -- $25 billion of it to U.S. banks alone. Every $1 decline in the price of a barrel of oil knocks $550 million from Mexico's oil revenues.

Last weekend, Mexico slashed its oil prices again -- this time by about $4 a barrel. Its average selling price is about $19.50. Unless world prices recover, Mexico will be hard-pressed this year to make all of the $10 billion in payments it owes banks and other creditors. To do so would deplete most of its foreign exchange reserves.

Last week, the country told its bank creditors that it might need to borrow between $8 billion and $9 billion this year, basing that projection on a decline in oil prices to $16 a barrel and a reduced production level of 1.3 million barrels a day rather than the 1.5 million barrels it averaged a year ago.

During the last few years, declines in oil prices have been accompanied by declines in interest rates, according to James McDermott, vice president of Keefe Bruyette and Woods, a securities firm that analyzes banks. The money Mexico lost in oil revenue was offset by lower debt payments. "This time, the price decline will not be accompanied by interest rate declines," McDermott said.

William M. Isaac, the former chairman of the FDIC who heads a bank consulting firm, said that, although Southwest banks with a heavy concentration in energy-related lending are likely to be hit hard by a severe decline in oil prices, other banks and their borrowers will benefit.

"Airlines, trucking companies and farmers, for example, will see an almost immediate improvement," Isaac said. At some airlines, fuel accounts for 50 percent or more of total costs.

But at many banks in West Texas and Oklahoma, where the entire local economy is dependent upon the health of energy producers, a sharp decline in oil prices will hit hard.

So far, domestic petroleum producers have not felt the full impact of the tumble in oil prices that has taken place in the world spot market during the last three weeks. Although spot prices are hovering near the $17-a-barrel level, most West Texas producers still are receiving about $22 for each 42-gallon barrel they produce, according to the head of energy lending for a major U.S. bank.

But unless spot prices turn back up, the so-called posted prices in the Texas oil fields will fall further. In the last week alone, the so-called posted price fell $2 a barrel.

As prices fall, more and more oil companies will cut back on exploration to conserve dwindling cash. That will throw more and more oil rigs out of work. Many of the nation's 1,300 drilling companies are small, thinly capitalized concerns that will not survive long without work.

For the most part, their loans are secured by the drilling rigs they rent out by the day. When drilling falls sharply -- as already is happening -- the value of the drilling rigs falls precipitously.

"When times are good, you don't need collateral for a loan to a drilling company. When times are bad, the collateral is worthless," according to the former head of energy lending at a major New York bank.

Although it is the smaller drilling companies that threaten the health of smaller and middle-sized banks in Texas and Oklahoma, the first casualty of the recent drop in oil prices was a big offshore drilling concern, Global Marine Inc.

Global Marine had been struggling with its $1.1 billion in debt for years. The dip in oil prices convinced Global Marine, the biggest publicly owned company of its kind, to file for Chapter 11 reoganization and renegotiate its debts with the protection of the federal bankruptcy courts.

"Global Marine was the first. There will be more," according to Lawrence Cohn, the chief banking analyst for the Wall Street firm of Merrill Lynch, Pierce, Fenner & Smith Inc. Most of Global Marine's debts were to foreign shipyards that built its fleet of offshore drilling rigs and to the U.S. Maritime Administration.

But the smaller drilling companies -- many of which are the oil equivalent of mom-and-pop operations -- mainly are in debt to banks. It was the failure of small drilling companies in Oklahoma that triggered the failure of Penn Square National Bank in 1982 and ultimately caused the demise of Continental Illinois in 1984.

It is not only the energy-related companies that will take it on the chin, according to Merrill Lynch's Cohn. There will be a spillover into the general economy in Texas and Oklahoma that is impossible to measure.

In Dallas and Houston, the real estate market has been hit hard -- in large part because energy companies conserving cash have been cutting back employes and the office space they need. A wave of building construction began several years ago on the assumption that energy companies, and the companies that service them, would be an ever-growing source of tenants.

Today, about 20 percent of the office space in Dallas is vacant, and large numbers of buildings will be completed this year -- without the prospect of tenants. In the Houston suburbs, 30 percent of the office space is vacant.

Even Texas farmers may suffer from the oil price decline.

"Mineral rights have held up the value of Texas farmland when farm prices were declining across the country. If oil prices continue to decline, farmers won't have that prop anymore," according to a West Coast banker.