Midway between white-collar Midland and working-class Odessa is a federal warehouse, a museum of paradise lost, that explains without words what cheaper oil means to the Permian Basin of West Texas and southeast New Mexico.

The basin, named for an ancient sea, is the home of America's richest oil fields, producing 20 percent of the country's oil. Wells in the Permian Basin pump the suddenly famous benchmark crude, West Texas Intermediate -- low in sulfur and easy to refine -- whose price on the spot market has fallen to a 10-year low of $17.25 per barrel.

The warehouse is rich in merchandise repossessed by the Federal Deposit Insurance Corp. from businesses and investors since 1983, when the Permian Basin economy last went bust and six local banks collapsed, largely under the weight of bad oil and gas loans.

On display for auction later this month are 10 mobile homes, a Mercedes Benz, pipeline equipment, the entire stockroom of a foreign-car repair shop, a clothier's mannequins, a 16th-century Dutch cabinet worth $20,000, jewelry and computers. Some items cannot be stored at the warehouse: Lear jets, oil rigs, ranches and industrial plants.

In the East and Midwest, cheaper oil benefits almost everybody. In the Permian Basin, a bellwether region for the oil states of Texas, New Mexico, Oklahoma and Louisiana, it means more cars and furniture in the FDIC warehouse, more bankruptcies, more foreclosures, less tax revenue. This week, energy economists began predicting a regional recession. They predict a manageable recession if the price per barrel lingers near $22, a disaster if it drops farther.

The Permian Basin has been this route before, and the equations of cheaper oil are so ingrained here that politicians and bureaucrats can recite them by rote. For every $1 drop in oil, Texas loses an estimated:

*$100 million in state revenue.

*25,000 jobs.

*$2 million for the university fund.

*$4 million for the shools fund.

*$3 billion in total economic activity.

The numbers are chilling, but there is no panic in the air. Surprisingly, that sense comes only during booms, when it seems as if every doctor, lawyer and real estate agent, along with thousands of Yankee carpetbaggers, suddenly becomes a Permian Basin oilman. Today, the mood is one of almost willful optimism. Tom Wageman, president of RepublicBank First National of Midland, successor to one of the failed banks, put it this way: "We will be tomorrow what we anticipate today. If we expect the worst, we will probably get it."

In the meantime, scores of oilfield service industries are surviving on the margin and will collapse if the price drop turns from a momentary shock into a yearlong trend. The contract drillers appear most vulnerable. While the major oil companies and independents can relax during hard times, relying more on proven fields and less on exploration, the drillers by definition can make it only when more new oil rigs are demanded and old ones are active.

The number of active rigs in the Permian Basin has been dropping year by year and week by week. The week of Feb. 2, 255 rigs were operating here, compared with 260 a week earlier, 281 a month earlier and 332 a year ago. During the same week in 1982, at the height of the boom, there were 483.

Several contract drillers in West Texas have reached bankruptcy as a result, though none received the attention given to Global Marine, one of the world's largest offshore drillers, when it filed for Chapter 11 protection two weeks ago in Houston.

"For the longest time our motto was 'Stay Alive Until '85,' " said G. Arthur Donnelly, who resigned last week as president of Midland Southwest Corp., a drilling company that has been slowly rebuilding since 1983. "Then '85 came and went with no change. It got to the point where we are drilling and just getting enough to pay for labor and fuel. No profit. Just doing it to keep the machinery working. And now the psychology of things getting better has disappeared."

Paradoxically, cheap drilling rates help keep the operators -- the oil owners -- afloat. Drilling prices are decreasing almost in proportion to the price decreases. While the drillers anticipate a grim 1986, the operators appear to be slightly more optimistic, and many plan to drill more this year than last. Said John Paul Pitts, oil editor for the Midland Reporter-Telegram, "The pessimism of the day does not appear to be reflected as strongly in 1986 budgets as in conversations."

"We are optimistic," said Jim Henry, president of Henry Petroleum, during a recent projection of 1986 operations in the Permian Basin. His company was planning to drill 47 wells this year, compared with 36 in 1985. "We feel this is a great time to drill because of the low drilling prices. Those who don't drill in 1986 will look back one day and wish they had."

Henry's projection was based on the price of West Texas Intermediate staying in the $25 range, the price posted Jan. 31 by most of the major oil companies. The vast majority of the oil here is sold on 30-day contracts at prices a few dollars higher than the spot and future market rates that have received international attention since they dipped below $20.

Some oil economists say that contract prices eventually reach the spot and futures levels, usually in 30 to 60 days. Most of the operators out here insist that there is no inevitable connection between the two.

"The press is making it sound like the spot market is the only price," said Perry Bolger, president of Brazos Petroleum Co. "We look at the spot market only as a trend, not an inevitability. It is a tool we use, another indication of what we might expect. In November, the futures were pushing the price up to $28. I didn't believe $28 oil would last then. I don't believe $20 oil will now."

In an opinion repeated by many oil operators here, Bolger said he was more troubled by the tax reform bill in Congress, which would make it more difficult for investors to use oil and gas enterprises as tax shelters, than by the price drop.

If oil prices remain low, according to Bernard Weinstein and Harold T. Gross at the Center for Enterprising at Southern Methodist University, jobs losses this time are likely to involve more white-collar workers and small businesses rather than solely the customary blue-collar cutbacks, including adminstrative offices in oil companies from the majors on down.

"Lower oil prices will expose further weaknesses in the state's financial institutions," they said in a recent study. "For those heavily exposed in energy, nonperforming assets are likely to rise and earnings likely to fall. Large losses should not come as a surprise, nor should the continual downgrading of many institution's debt ratings."

There is a natural cycle of boom and bust in the oil business. The people of West Texas have been through both many times since the first commercial oil was produced here in 1920, and in many ways they find the good times more frightening than the bad.

"Everybody felt the urge to get into oil," Harry Spannaus, director of the Permian Basin Petroleum Association, said of the early 1980s. "It was a fever. It drove the costs up for everybody. You couldn't find equipment. There were tent cities on the edge of town. It got to be too much in 1981. You couldn't walk across the street against a red light."

"The boom period, that's when the panic sets in," said Odessa Mayor John Minos. "People see nothing but dollar signs. Nothing but large sums of money. It's kind of analogous to a gold rush. Some of them go crazy. It puts a lot of pressure on everybody."

Odessa outgrew its infrastructure in 1982. There did not seem to be enough houses, roads, schools, sewers. But the city's earnest attempts to deal with the problem backfired. As soon as the city reassessed real estate and provided the needed services, the bust hit. Real property values dropped, the tax base diminished and citizens passed a Proposition 13-style property tax rollback.

Office space that once sold for $21 per square foot is now going for half that. Thousands of modest homes in Odessa and Midland have been on the market for several years. Some of that office space, and many of those houses, have fallen into the hands of the FDIC, known contemptuously here as "the feds." Later this month, in a sealed-bid auction, the feds will sell 20 properties worth about $16 million.

The feds arrived in the summer of 1983 when a little bank out by the airport, Metro Bank, went under and five more followed. No one here is expecting another bank failure. The Permian Basin's financial institutions have grown more circumspect in lending practices, especially when it comes to oil loans. The days are long gone when Midland bankers made loans based on assumptions that oil would be selling for $50 to $75 per barrel. Some of the fastest-growing banks in the area refuse to make oil and gas loans.

Such financial upheaval has raised the federal presence here from a weekend strike team to a permanent occupying force. The banks that collapsed were quickly bought out by larger ones that were allowed to assume only the most desirable loans, leaving the feds to try to recover nearly $1.2 billion in bad debts. The FDIC has hired 317 accountants, lawyers and liquidators, placing it among the basin's top 20 employers. They occupy three spacious floors of a gleaming emerald office building on the north end of Midland.

Stanley Clark, the managing liquidator for the FDIC office here, said he does not see despair in the faces of those who have lost their property. It is not like the Midwest, he said, not like the farmers who suddenly lost what took generations to create. In the Permian Basin, Clark said, many of those who have lost their property just made bad decisions four years ago; they got into the oil business without knowing anything about it. Those who have been cautious, he said, will most likely survive the latest shock.

Clark hopes to collect $200 million in bad debts in 1986, leaving another $1 billion or so to recover before his occupying force leaves town. If the price of oil stays down near $20, the feds could be here for another 10 years.

Many FDIC employes are local residents like property manager Mike Kimbrow, who worked in oil field services until his boss went bankrupt in 1983 and is now responsible for the warehouse auctions. A few days ago, he walked through the warehouse and examined a row of repossessed furniture, including some desks with business correspondence still in the drawers. It was painful for him. He used to work with the company that lost the desks.

"I remember where these things were during the good times," he said. "And now they're here in this place, ready to be sold. It's haunting. I don't like to see it. I don't like to do it. And now it might get worse. With oil prices dropping, we darn well might need another emergency auction in a few months."