WASHINGTON (Reuters) - A congressional committee narrowly approved legislation on Wednesday to give the Bush administration the authority it wants to raise fuel economy standards for passenger cars.

But the House of Representatives panel rejected an amendment to make all new vehicles, including pickups and sport utilities, average 33 miles per gallon within 10 years.

The defeated amendment was the first formal test of recent calls by many Democrats and some Republicans in both houses for bold action to reduce the nation's dependence on imported oil.

Pressure has mounted on the administration and Congress to respond to skyrocketing gasoline prices, which peaked in recent weeks above $3 per gallon. The sharp increase abated more recently with prices this week averaging $2.91.

The House of Representatives Energy and Commerce Committee voted 28-25 to approve the proposal to rewrite 30-year-old Corporate Average Fuel Economy regulations sought by the Transportation Department last month.

Some members were uncomfortable with provisions that might hurt manufacturers as well as the speed at which the legislation was being pushed by Republican leaders.

The change would cover foreign and domestic passenger cars. Passenger cars, which include compacts, sedans and wagons, account for about 25 percent of domestic oil consumption.

The legislation proposed no mpg target, but requires a final regulation by 2008. The Transportation Department would give automakers at least 18 months after that to convert their fleets. Many passenger cars already exceed the current average standard of 27.5 mpg.

Passenger cars and light trucks, which include sport utilities, pickups and vans, are divided into two categories for calculating fuel economy.

In March, the Bush administration raised fuel standards on light trucks by 1.9 mpg to 24.1 mpg by 2011, and estimated the change would save more than 10 billion gallons of fuel.

An amendment offered by Rep. Edward Markey, a Massachusetts Democrat, would have required all new vehicles, both cars and light trucks, to average 33 mpg within the next 10 years.

"That would be a powerful signal to sent to the Middle East and the oil futures marketplace," Markey said before his proposal fell, 36-17.

The bill approved by the panel also permits transportation planners to recalculate how fuel targets are met, which the Transportation Department did for the light-truck class in March.

Mineta said in a letter to House Speaker Dennis Hastert, an Illinois Republican, on Wednesday that new fuel savings calculations are needed for passenger cars to prevent manufacturers from building smaller models in order to make them go further on a gallon of gas. Critics dispute Mineta's safety argument, which is also voiced by the industry, that producing lighter cars could compromise safety.