The first purpose of this research is to build a Cobb-Douglas Production Model considering capital, labor, and energy as the main inputs, in order to identify the role of energy, investment, and new technology in Mexico's economic growth. The estimation of this model shows that energy stands as a source of growth independent of capital and new technology. As a conclusion, Mexico must either develop its domestic sources of natural gas or substantially increase imports. The second purpose of this research it to build a complete oil and gas supply model for Mexico in order to identify the financial variables that could affect future oil and gas drilling, reserves, and production in order to secure the hydrocarbon supplies required for future generations The results of this research will be of vital interest to the staff of President Vicente Fox and to top-level officials at PEMEX. Energy in Mexico is of highest-order importance, stressed by both President Vicente Fox and PEMEX. The main issues debated in the Mexican political scenario are: (1) PEMEX could generate a huge economic surplus, but it is not possible because it plays an important role as a source of economic resources for Federal Government projects through a high Tax Burden. This statement is supported with econometrics. (2) PEMEX's challenge is to increase oil and gas exploratory and development drilling activities. There has been a lack of investment for these activities during the last years. The Secretary of Energy designed the Multiple Service Contracts (MSC) to invite foreign companies to invest in a state-owned company. This sounds as a probable promising alternative supported by the results of this research; however, there is still great debate about the MSC and the Energy Reform needed to let the energy sector support a successful Sustainable Development Growth Policy The analysis of the oil and gas supply model in this study leads to important economic policy recommendations that could support future debates on these issues
