When propane prices soared during the polar vortex, news of the regional supply shortages made the national news and forced the Federal Energy Regulatory Commission (FERC) to invoke its emergency powers to alleviate the situation.

Chief among FERC’s actions: Directing Enterprise Products Partners LP (NYSE: EPD) to temporarily provide priority shipping on its TE Pipeline from the Gulf Coast hub in Mont Belvieu, Texas, to the Midwest and Northeast.

Propane markets in the Midwest were particularly hard-hit by shortages. The price of this natural gas liquid (NGL), which can be used as petrochemical feedstock and a heating fuel, surged to an all-time high of $4.90 per gallon at the Conway hub in Kansas.

(Click graph to enlarge.)

Other major NGL hubs experienced a jump in propane prices last winter, albeit not to the same extent as Conway. Needless to say, this sudden spike in prices came as a surprise, especially when you consider that US propane production has surged in recent years.

(Click graph to enlarge.)

Let’s revisit the factors behind last winter’s propane shortage in the Midwest.

The largest US corn crop in history and a wet growing season dramatically increased demand for this propane in the Midwest, depleting inventories by about 20 percent relative to the prior year. Farmers use the NGL to reduce the moisture content in their corn, a necessary practice to prevent mold and spoilage during storage.

This increased draw on stored propane in the late fall, coupled with increasing volumes of propane heading to the Gulf Coast for export and surging demand amid frigid temperatures, squeezed prices higher and pulled supplies from the Gulf Coast.

A Repeat of Last Winter?

With winter just around the corner, many investors and market observers wonder whether we’ll witness another spike in Midwest propane prices.

According to data from the Energy Information Administration, propane inventories in the Midwest climbed to within 15 percent of their five-year average in June 2014—an impressive rebound from a 35 percent shortfall in January.

(Click graph to enlarge.)

Once again, weather conditions will determine the outlook for Midwest propane prices this winter.

Over the next few months, investors should keep a close eye on rainfall. The US Dept of Agriculture’s most recent projections call for a record 2014-15 corn crop of 15.6 billion bushels; another wet fall in the Midwest could erode inventory levels as winter approaches.

Another frigid winter could also tighten the supply-demand balance in the Midwest propane market.

At the same time, Kinder Morgan Energy Partners LP’s (NYSE: KMP) repurposing of its Cochin Pipeline to ship condensate to Alberta means that the Midwest will rely more heavily on rail and truck transport to offset any propane shortages that develop this winter. Prior to the pipeline reversal, Cochin had delivered up to 50,000 barrels per day of propane from Alberta and Bakken Shale to the Midwest.

Why should investors care about a potential spike in Midwestern propane prices?

For one, increasing price volatility in US propane market should accelerate consolidation in the highly fragmented propane distribution market. During last winter’s propane crisis, the industry’s three majors demonstrated the importance of scale to dealing with volatile prices and maintaining a high level of customer service. These names offer higher yields and steady, acquisition-driven distribution growth.

The last propane shortage in the Midwest caused propane prices in Mont Belvieu to jump, temporarily eroding margins on exports to some international markets. Reports indicated that unfavorable price differentials prompted overseas customers to cancel the shipment of six cargos last February.

As growing US export capacity links domestic propane prices to international markets, the economics of overseas shipments could become more volatile, especially in the winter months–a concern for companies that have exposure to export margins..