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Raymond James this morning predicted that gasoline demand could skyrocket as prices remain low

A note published by Raymond James Equity Research this morning suggests that U.S. gasoline demand could grow up to 3%, or about 300 MBOPD, in 2015. This impressive growth would put demand on track for its fastest increase since the 1970s.

Based on information from the Energy Information Administration (EIA), Raymond James says that the last two years have shown the fastest stacked two-year growth rate in U.S. gasoline consumption since 2002-2003 and the firm only expects that trend to increase next year as oil prices remain depressed.

RayJ YonY Monthly US Gasonline Demand

According to the note, “the combination of robust employment trends (if they continue) and much lower prices at the pump will likely serve as a catalyst to jumpstart oil demand.”

Possible effects on prices

While not its official forecast, Raymond James says, “Adding the average wholesale-retail spread implies a full-year average of $2.52/gallon in 2015.” If the prediction is correct, the average price for gasoline in 2015 would be 32% cheaper than the peak national average of $3.71/gallon. AAA already reported American consumers saved a total of $14 billion at the pump in 2014 compared to 2013.

While Raymond James’ note paints an optimistic picture for consumers, not everyone agrees that gasoline prices will remain low forever. John Hofmeister, former president of Shell Oil (ticker: RDS), told USA Today that he believes prices will likely rise past the peaks seen before the current price drop.

“The triggering mechanism will be global demand growth relative to how much capital constraint gets baked into future plans for production this year and next,” Hofmeister said. “If new production capital is deferred and demand growth continues at 2% or more, we’ll see capacity constraints during 2016 (an election year, of course) drive prices higher. Whether we reach $4.00 a gallon or push past, it’s too early to tell.”

While he is not entirely sure where prices will end up in the next few years, Hofmeister believes they will reach $5.00 eventually. “As demand growth approaches 100 MMBOPD and the industry production falls short, yes, I believe later this decade we’ll see $5.00 a gallon and possible shortages of fuel in some parts of the world,” he said.

Regardless of where prices do settle, Hofmeister seems to agree that demand is likely to grow. If Raymond James’ forecast is correct, that growth could be on a scale the U.S. has not seen since the late 1970s.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.