Mr Bush, speaking at Camp David, also recognised Iraq’s insurgency remains a serious challenge despite Abu Musab al-Zarqawi's death.
"I fully recognise that's not an end to war, on the other hand it was a major blow to al-Qaeda ... and the terrorists who are trying to spread violence and stop the emergence of a new democracy," he said, referring to the killing last Wednesday of the al-Qaeda leader in Iraq.
Mr Bush, Vice-President Dick Cheney, Defence Secretary Donald Rumsfeld, Secretary of State Condoleezza Rice and aides began two days of consultations at Camp David to reassess strategy for the increasingly unpopular war that has dragged down the president's approval ratings in a congressional election year.
Mr Bush is languishing in the lowest approval ratings for any US president in a generation.
They spoke by videoconference with the top US commanders in Iraq, generals George Casey and John Abizaid, as well as the US ambassador to Iraq, Zalmay Khalilzad.
Mr Bush asked the generals to thank US forces for bringing Zarqawi "to justice".
Zarqawi was killed when an F-16 jet fighter levelled an al-Qaeda hideout with two 227-kg bombs.
Oil the key
After the talks, Mr Bush said oil reserves could be better used as a force for good.
"My own view is that the government ought to use the oil as a way to unite the country and ought to think about having, you know, a tangible fund for the people so the people have faith in the central government," he said.
Mr Bush was due to speak to Iraqi Prime Minister Nuri al-Maliki via video conference on Tuesday (local time).
Mr Bush said he and senior US officials, meeting three years after Saddam Hussein's ouster, had discussed ways to boost Iraq's oil production.
"There's some unbelievably interesting exploration opportunities and the new government is going to have to figure out how best to lease the people's lands in a fair way," he said.
"The oil sector is very much like the rest of the infrastructure of Iraq. Saddam Hussein let it deteriorate. There wasn't much reinvestment, not much modernisation," said Mr Bush. "There's a lot of work that needs to be done."
“Neighbours could do more”
Mr Bush rounded on Iraq’s neighbours, saying they "ought to do more to help" the war-torn country's fledgling government.
"Iraq's neighbours ought to do more to help, and we're constantly working with our friends in the neighbourhood to encourage them to support this new democracy," said the president.
Government aide Dan Bartlett called the completion of Iraq's national unity government a "fundamental break point" for the Iraqi people and said the meeting aimed to take a comprehensive look at all Iraqi government agencies to make sure the government of Iraqi Prime Minister Nuri al-Maliki is successful.
The White House also sought to temper heightened expectation among many Americans that Zarqawi's death would lead to US troop reductions soon.
Mr Bartlett said the meeting was not about troop numbers and Mr Bush's position remained that any withdrawals would be based on conditions on the ground.
Troop pull-out predicted
Still, the commander of US forces in Iraq and Mr Maliki's national security adviser both predicted Sunday that US troop levels, now around 133,000, would likely fall over in the coming months.
On Sunday, US General George Casey suggested that the filling of crucial security posts in Mr Maliki's cabinet last week and continued progress in training Iraqi forces would open the door to reducing US troop levels this year.
And Iraq national security adviser Mowaffak al-Rubaie told US television on Sunday that the talks at Camp David would deal with US troop levels, predicting that US-led forces could be sharply drawn down by the end of 2006.
"I believe by the end of the year, of this year ... that the number of the multinational forces will be probably less than 100,000 in this country," Mr Rubaie told CNN television.
"By the end of next year, most of the multinational forces will have gone home ... By the middle of 2008, we will not see a lot of visibility, neither in the cities or in the towns, of the multinational forces," he said.
Mr Bush has declined to endorse Mr Maliki's prediction, in late May, that Iraq's fledgling security forces would be ready to take over from US-led troops by late 2007.
The US Senate is this week discussing a new budget for the US military in Iraq and Afghanistan. Senator John Kerry, the Democratic challenger in the last presidential election, has proposed an amendment that calls for the withdrawal of US combat troops this year.