Earlier this month, Libyan Leader Muammar Qaddafi announced his intention to drive a wedge between the United States and its European allies. Speaking to a group of West European ambassadors at his heavily fortified headquarters in Tripoli's Bab Aziziya barracks, Qaddafi held out a tantalizing offer of $36 billion in development contracts for the Europeans over the next five years.

But the prospect of plunging world oil prices -- to $20 a barrel or less -- has made Qaddafi's plans appear, in the eyes of many Tripoli-based diplomats, to be little more than "pipe dreams" or "castles in the air."

"Nobody believes he's got $36 billion for development projects," said one diplomat. Such an expenditure over five years would amount to about 90 percent of the country's current foreign exchange earnings, this envoy pointed out.

What has often been called Qaddafi's "oil weapon" is the weakest it has ever been. Revenues of $20 billion a year in 1980 plunged to about $10.4 billion in 1984 and $8 billion last year. They now are likely to drop still further as a global oil surplus drives prices down.

Libya's oil income may fall even more sharply if United States oil companies adhere to President Reagan's call for Americans to cease all economic dealings with Qaddafi's regime by Feb. 1. The oil majors, however, have managed in the past to circumvent such embargoes.

Qaddafi no longer has the cash to buy whatever he wants or needs to keep his people happy. He has had to cut imports dramatically, leaving market shelves bare and many shops closed for want of goods.

He no longer has the lure of quick and vast wealth to offer the West's oil companies, as he did in the early 1970s when Libya was in the vanguard of oil producing nations pushing prices toward $40 a barrel.

At the same time, Qaddafi's political troubles, both internal and external, have diminished the air of stability with which he assured oil companies that their economic interests would be secure enough to keep them happy.

But even if blunted, the oil weapon still exists and Qaddafi, according to diplomats in Tripoli, is likely to use it as shrewdly as ever.

Libya's light, low-sulfur crude is among the best in the world and industry statistics show that however much other prices rise or fall, Qaddafi's oil prices remain near the top of the graph. Libya's proximity to Europe makes transport cheap and, in normal times, safe. There is no need to ship through the war-torn Persian Gulf. It was no coincidence that the Libyan oil boom began in earnest between 1967 and 1975, when the Suez Canal was closed.

Libyan oil, moreover, costs only about $5 a barrel to produce, diplomats said.

"In December you could actually get $30 a barrel for Libyan light crude. Now it's about $25," said one European envoy whose nation still conducts extensive trade with Libya. "So there's still a lot of profit to be made on $25 a barrel."

This diplomat and other analysts doubted that oil prices, even if they drop close to $15 a barrel, could stay there long. The effect would be to drive more costly production out of business, reduce world supply, and still leave those countries with cheaply pumped oil in a strong position.

Meanwhile, Libya's unique regime, combining a philosophy verging on anarchy with police-state suppression of serious dissent, may have the flexibility and durability to ride out the troughs in oil prices.

Despite indications of unrest in the Army and the assumption among many diplomats that discontent is growing as the wealth of a few years ago has disappeared from Libya's daily life, there is little concrete evidence to support theories about widespread dissension.

Qaddafi, long before the leaders of many other oil-producing countries, imposed austerity measures to keep spending in line with revenues in ways that even the International Monetary Fund found "commendable" in a confidential 1985 report. As erratic as his political rule is sometimes portrayed to be, his economic regimen has consistently been marked by sober calculations of what the market can bear and what his country can afford.

At the moment, to compensate for drops in prices, Libya has inched up its production after a summer slump that went below its OPEC quota of 990,000 barrels a day. According to the latest figures available to diplomats in Tripoli, Libya is now producing about 1.2 million barrels a day.

It is in these efforts to boost production to sustain revenues that Qaddafi may become vulnerable to some of the economic pressure being applied now by Washington.

Although the United States in the 1970s accounted for as much as 40 percent of Libya's oil sales in some years, the embargo imposed in 1981 eventually reduced that figure to zero.

Qaddafi found ways to diversify and increase his share of European and Latin American markets. But at least four major U.S.-affiliated oil companies stayed active here, as well as several management, engineering and oil field service companies. U.S. personnel remained in some management and consulting roles even at Libya's National Oil Co.

According to sources at the Belgian Embassy, which oversees American diplomatic interests in Tripoli, most American companies are now inclined to pull out rather than face the newly stated determination of the Reagan administration to take measures against them.

But the decline in oil prices, and thus the decline in profits for those who stay, is at least partly responsible for the decision by many American companies to depart now after ignoring previous appeals, in the opinion of several diplomats.

"Oil service companies pulling out will leave quite a lot of assets," said one diplomat with close ties to the European and U.S. communities here. "The companies will have to decide if they can afford to leave behind 30 or 40 or 50 million dollars' worth of equipment."

Those that have not already amortized their assets will find it difficult to leave, he suggested. "Others will feel they've done well enough and it's better to pull out before they're involved in some kind of emergency."

The maximum production level Libya has been able to achieve recently before the current crisis, diplomats said, was about 1.5 million barrels daily.

Even if all the Americans leave, this source suggested, "it won't be a case of switching off the tap. It will be a matter of slowly running down." As old wells run dry, new ones will take longer to come on line without American expertise.

But no one in Tripoli wants to underestimate Qaddafi, who has a long history of breaking cartels and embargoes aimed at reining him in. His tactics may range from those of a hard-nosed businessman to outright terrorism.

In the 1970s he maintained intense competition among his clients, then moved to raise taxes and prices by choosing the most vulnerable of his partners or customers to press for concessions. Once one gave in, others followed.

In August 1984 the appearance of naval mines in the Red Sea -- now widely attributed to a clandestine Libyan operation -- underlined the vulnerability of that route for oil shipments and underscored the accessibility of Libya's fields.

The Soviets, meanwhile, have become an increasingly important trading partner for Libya and appear to have backed Qaddafi in his U.S. confrontation with shows of their naval presence and new arms shipments. But it is not known whether the Soviet Bloc will accept Libyan crude at higher than market prices as a way of repaying the estimated $5 billion military debt Qaddafi owes Moscow.

Qaddafi played on all these elements -- Europe's need for Libyan oil and its fears of the Soviet presence and of terrorism -- at his meeting with European diplomats here. If they did not take his promises of development projects seriously, his threats to turn the Mediterranean into a battleground and to fling his strategic country into Moscow's camp were regarded more gravely.

Such threats and such economic considerations as are left appeared, from the perspective of Tripoli's diplomatic corps at least, to have played a role in Europe's reluctance to go along with the U.S. boycott.

But one European diplomat said, "There comes a point where you don't want people to blow up your airports or shoot people down in your streets." With oil prices dropping, he suggested, over the long run even for nearby Europe, business as usual with Libya may simply not be business worth doing.