The plunge in world oil prices, at a time when Soviet oil production also has fallen off sharply, has hit the the Kremlin where it hurts most: in its hard-currency earnings.

As the world's largest oil producer and one of its largest exporters, the Soviet Union stands to lose as much as $500 million a year for each $1 per barrel drop in oil prices, according to western analysts.

Soviet hard-currency earnings from exports totaled $26.2 billion in 1983, of which oil represented $15.5 billion, or more than half. A fall in oil prices to $20 per barrel could reduce Soviet revenues by more than a third, cutting back Moscow's ability to buy what it needs for the economic revitalization envisaged by Soviet leader Mikhail Gorbachev.

The Soviet Union ended 1985 with a $6 billion deficit in its balance of payments in hard currencies, compared with a $4 billion surplus in 1984.

Oil makes up 63 percent of Soviet trade with the developed West and is a key component of its trade with Eastern Europe, which is heavily dependent on Moscow for all forms of energy.

Soviet oil revenue is needed to help pay for the import of equipment and technology necessary for the retooling of Soviet industry. In Eastern Europe, Soviet oil supplies are one of the political and economic bonds integrating the Warsaw Pact.

Given the importance of both markets, the drop in both price and supply means Moscow will have to look for ways to balance political considerations and economic accounts.

"If they had more oil, they would sell it to make up the difference," said one western expert. "Unfortunately, they don't have the oil."

The downturn in Soviet oil output was confirmed last weekend with the release of 1985 figures showing Soviet oil production at 4.16 billion barrels, down from a 1984 level of 4.29 billion barrels and from a 1983 level of 4.31 billion barrels.

Western experts here note that the Soviets have several options to make up for cutbacks in hard-currency sales, including expanding their credits in the West or increasing sales of gold. So far, Moscow has not indicated what course it will follow.

According to western diplomats and businessmen here, Moscow scaled back its deliveries to Western Europe last year, particularly in the first quarter -- by as much as 20 percent to some customers.

Although deliveries returned to normal levels later in the year, some experts expect to see an overall shortfall in Soviet deliveries to Western Europe for 1985. They see this as a sign that Moscow may be shifting away from customers there, particularly on the spot market.

In the meantime, in recent official statements, Soviet spokesmen have reiterated promises to maintain supplies to Eastern Europe, along with repeated advisories on the need to save energy.

Alarm over dwindling production has led to a stream of articles in the Soviet press critical of the management of the oil fields in western Siberia and to a sharp 31 percent increase in investment in the oil industry for 1986.

Western experts here see the attention paid to oil as a sign that the Kremlin leadership is determined to force oil production back up, or at least keep it stabilized. The underlying assumption, they say, is that the Soviets cannot afford a drop in oil exports.

On the domestic front, the Soviet Union already has embarked on a program that stresses energy conservation and, where possible, conversion from oil to gas.

The Soviet Union also has been promoting gas instead of oil to foreign customers. In contrast to oil, gas has been the star performer of the Soviet economy.

But the recent decision to increase investment in oil confirms that oil cannot be displaced as the linchpin of Soviet foreign trade.

Until last year, figures had showed a shift in Soviet oil exports, favoring the West over the East. The most marked change occurred in 1982, when Moscow cut oil exports to Eastern Europe by 10 percent.

In 1984, when the Soviet Union was exporting 3.8 million barrels of oil a day, the distribution was roughly divided between West and East at 1.9 million barrels a day each. By contrast, in 1980, Communist countries bought 2 million barrels of Soviet oil a day, while the West was buying 1.3 million barrels.

Western Europe is Moscow's key hard-currency customer, buying 1.6 million barrels of the 1.9 million barrels sold a day for hard currency in 1984.

The biggest customer in Western Europe is the Netherlands, although much of the sales there are on the spot market. The next biggest customer in 1984 was Italy.

Traditionally, the Soviet Union has kept its oil prices below those set by the Organization of Petroleum Exporting Countries, to ensure its share of the market.

In addition to their own oil, the Soviets resell oil received in exchange for arms and equipment sold to such countries as Libya, Iraq, Saudi Arabia and Iran. Those "imports" are more than enough to cover the Soviet oil shortfall.