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COLLEGE STATION, Texas (AP) _ National Security Adviser Condoleezza Rice dismissed Saddam Hussein's threat of an oil embargo Monday, and said it won't deter President Bush's quest to see the Iraqi leader ousted.

``We ought to remind them that they're going to have a hard time eating their oil,'' Rice said, suggesting that Saddam needs money from oil exports more than the United States needs Iraq's oil.

Rice urged other oil-producing nations to ``step up'' and make up the difference, as energy prices rose after Saddam's announcement. She did not elaborate.

She addressed 2,500 people at a Texas A&M auditorium shortly after Saddam said he would cut Iraq's oil exports for 30 days or until Israel withdraws from Palestinian territories. In Washington, President Bush used Saddam's threat to press the Senate to open the Arctic National Wildlife Refuge to oil drilling and ``diversify away from somebody like him.''

The oil threat from Baghdad was the latest complication for the Bush administration as it tries to balance the war against terrorism with the ripple effects of Middle East violence.

Even as Rice spoke in Texas, Israel continued to snub Bush's request to end incursions in Palestinian cities.

Rice repeated the administration's call for a halt to the Israeli incursions and for Palestinians to crack down on terrorism. Palestinians must accept that Israel will always exist, and Israelis must embrace a separate Palestinian state, she said.

And she urged moderate Arab leaders to help Powell secure a cease-fire, and eventually peace.

Rice, who took several questions from the audience, used her speech to outline Bush's response to the Sept. 11 attacks and the long-term implications. In denouncing terrorism, she signaled to Palestinians that the United States will not allow violence to advance their cause.

``Let us be very clear, terrorism has no positive agenda. Terrorists are not fighting for anything. Terrorists are against peace. They are against freedom. They are against life itself,'' she said.

Former President Bush, whose official library is a few blocks from the speech site, introduced Rice as a ``very seasoned, experienced hand in foreign affairs'' who served on his national security team.

Praising her former boss, she drew a comparison between the challenges Bush faced during the Persian Gulf War and those facing his son.

``Just as no one predicted Sept. 11, 2001, no one predicted Aug. 2, 1990 _ the date Saddam Hussein's Iraqi troops invaded Kuwait,'' she said. ``But in both cases, a great nation set its sights on great causes, deploying our troops halfway around the world on a moment's notice to defend liberty and thwart the forces of murder and mayhem.''

As for the current President Bush's hopes to change regimes in Iraq, Rice said there are many ways to do so and the president has not decided his course. Bush has said all options, including military action, are under consideration.

Rice suggested that Saddam hopes the oil embargo will weaken America's resolve against terrorism.

``The United States will not be set off course by such tactics,'' she told a student who asked about the oil embargo.

As for Saddam: ``Sooner or later, the world is going to have to deal with the fact that this dangerous man is acquiring dangerous weapons.''

Prime Minister Tony Blair delivered a similarly tough warning to Saddam during a speech Sunday at the Bush library, following a weekend of talks with the president.