If there is already rail traffic bringing this oil (in Cushing) back to Gulf Coast Refineries, why is WTI selling at a steep discount to other oils (Brent in particular)?
Because Truck and Rail is rather expensive compared to pipeline shipment. While the stock levels of crude in Cushing are quite high, they have not been just piling up at 400,000 barrels per day for the past couple years.
The oil is getting moved. It may take many different routes and the rail capacity at the typical refinery is not going to handle near that capacity. It becomes expensive to ship this way to many different refineries and that drive the localized price down.
We have the same issue going on in South Texas. The Eagle Ford Shale formation is producing so much oil the existing pipelines cannot move it, nor are they all in the best location. In that area, there is not a lot of rail loading stations (like already exist in Cushing). Instead it is moving by truck on the road at a significant discount. The pipelines are being built, but it takes year from when the need is first realized, through the land aquisition, engineering, purchase of pumps, pipes and materials, construction and start up.
I was on a project building a truck unloading facility last year for this reason. The area refineries truck racks were being overwhelmed with traffic. We crossed a river with a short pipeline to get to another area to split up the truck traffic and built multiple truck unloading stations with tanks and pumps. It is a temporary fix, we also had to add flanges for future pipeline tie-ins once they arrive.