U.S. growth in natural gas for transportation and the switch to natural gas from oil-based fuels by petrochemical companies are two big reasons that domestic oil demand isn't growing, according to an analyst with Raymond James & Associates Inc.

Analyst Pavel Molchanov in a note Monday listed four trends that are keeping oil demand low even as supplies increase. "We have noted in the past that, as economies become more developed, oil intensity peaks and begins to decline," he said. There are "numerous reasons for declining U.S. oil consumption," with four key drivers, two of which are a rising fuel economy for vehicles and changing driver habits.

The other two trends relate to U.S. natural gas, with oil demand falling because of a growing market for natural gas vehicles (NGV) and a shift by the petrochemicals industry to use more gas.

"Although not as fast as you think, fleet adoption of NGVs is gaining traction," Molchanov wrote. "With the price spread between crude oil and natural gas currently near 30:1 in North America, it's readily apparent that the economics of natural gas fuels -- compressed natural gas (CNG) and liquefied natural gas (LNG) -- are highly appealing."

However, the market for natural gas in the transportation market "remains marginal in the context of overall transportation fuel demand," said the analyst. U.S. Department of Energy data "state that only 90 MMcf/d of gas was used as vehicle fuel in 2012. This equates to 300 million gallons of fuel, less than 1% of what we think of as the 'addressable market' (buses, commercial light trucks, and freight trucks)..."

Raymond James' "channel checks indicate that actual usage of natural gas fuels is somewhat higher," said Molchanov.

"While growth in recent years has been toward the low end of industry expectations, we project accelerating growth in the coming years," reflecting an "expansion in both fueling infrastructure (especially along interstate truck routes) and the availability of NGVs," although the U.S. NGV market remains a fraction of what it is in many other countries, such as China, Brazil and Argentina."

In North America, NGVs are "overwhelmingly a commercial vehicle market," he said. "Fleet operators (either governmental or private-sector) tend to think more strategically about the economics of vehicle options than ordinary consumers" and "the economics of natural gas fuel are intrinsically better for commercial vehicles.

"The reason is simple: the more miles a vehicle drives per year, the more it saves due to cheaper CNG/LNG pricing relative to gasoline/diesel."

Petrochemical producers also have shifted "substantially" from oil to NGLs in their feedstock mix, Molchanov said. Raymond James estimates that the use of oil-based feedstocks such as naphtha and gas oil "has been cut by more than two-thirds since 2005, with clear substitution in favor of gas-based feedstocks (ethane, propane and butane)."

From 2005 through 2012, "the implied reduction in oil demand was 385,000 b/d, which alone accounts for one-sixth of the total decline in domestic oil demand over this time frame." If the remaining use of naphtha and gas oil were to "disappear completely." it would cut about 170,000 b/d, or about 1% from domestic oil demand, he said.

 Because Raymond James' analysts "envision a continually wide disconnect between oil and gas prices as far as the eye can see, such a scenario is not an impossible one."