In a saucepan cook onion and red sweet pepper in hot margarine or butter until tender. Stir in flour, garlic powder, and pepper. Add water. Cook and stir over medium heat until slightly thickened and bubbly. Cook and stir for 1 minute more. Stir in spinach and cheese. Cook and stir until well blended.
Rinse oysters and drain well; coarsely chop. Stir into cheese mixture; heat through. Transfer to a serving bowl or chafing dish. Serve warm with melba toast rounds, French baguette bread slices, or crackers. Makes 12 servings.