When glucose/glycogen is low and at a premium, the body's response overall is to mobilize fat stores (via SNS activity), so you've got a lot more FFA in the bloodstream. Locally, the cells will upregulate insulin sensitivity and FFA oxidation, via cAMP/AMPK.
Don't know the actual biochem behind it offhand, beyond that, but when you zoom out a bit that's the process. Ultimately, the body's going to get energy from where it can get it. If FFA is all that's available, then FFA it is.
Gluconeogenesis will only become a significant contributor to blood glucose with very high intakes. I think even at 1.5g/lb it's not any significant contribution; on low carbs/cals, most of that is being oxidized and going to support protein turnover anyway.
That, coincidentally, is why anaerobically-intensive exertion is such a bitch on low carb intakes.
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