Energy Secretary Chris Huhne tonight defended the coalition's tax hike on North Sea oil amid warnings that it has hit investment.
Mr Huhne said the Government could not afford to ignore the sharp increase in oil prices as it struggled to balance the books.
The "trigger" mechanism promised by Chancellor George Osborne also meant the levy would reduce if costs fell again.
The comments came after industry body Oil and Gas UK raised concerns about a "dramatic drop in confidence" since the supplementary tax on production was lifted from 20% to 32% to fund a cut in fuel duty.
Giving evidence to the Commons Energy and Climate Change Committee, Mr Huhne said: "I recognise that circumstances have changed in the oil market, that we have had a very substantial increase in the oil price.
"As we know last year's price for Brent Crude was about 80 US dollars. We are now looking at a price more around 125 US dollars.
"So there has been a very substantial increase. It has been in the circumstances that we all know are very difficult.
"Fiscal circumstances where the Chancellor has to square the circle of inheriting a situation where we were spending 113p for every one pound that was coming in.
"That was clearly not sustainable. It was absolutely essential that we got a grip on the finances."
Economic Secretary Justine Greening added: "We were very clear in the Budget that we saw a trigger price at which point the supplementary charge would be coming back down to 20%.
"That is precisely to address the sorts of concerns which you raise, which is that there is a scenario by which the oil price could fall, and in that scenario we would not want to see investment damaged."Reuse content