You may be interested in this paper by Ugo Bardi. While not strictly speaking history, it is an ecological economics study of the history of the whale industry and the process of substitution. Bardi's conclusion is that the end of the whale industry was largely caused by depletion of the whale population which caused whalers to travel further and longer for less reliable catches and less about the birth of the oil industry. There's a few important take aways.

• Peak whale was likely somewhere around 1849. By 1879 Starbuck notes that the whalers are finding catches more difficult and that longer voyages, longer cruise times and more expensive outfittings are the norm in his time.

• Looking at inflation adjusted prices for whale products there are huge drops in prices between 1850 and 1860 (Graph on page 3). However, these drops are from all time price highs. The bottom of the price collapse in the mid-1870's is only slightly lower than the highest average yearly price for any year before 1850. As such the price doesn't so much collapse as it does rise as whale depletion starts to affect the price.

• Alcohol blends began to dominate the lighting oil market as early as 1830. They were substantially cheaper than whale oil. Whale oil was a premium product which already had lower priced alternatives namely 'Camphene' (a mix of camphor, alcohol and turpentine), lard oil and coal oil. Camphene was the leading lamp oil with something in the area of 200 million gallons per year while whale oil peaked at around 18 million gallons. . "By the late 1830s, alcohol blends had replaced increasingly expensive whale oil in most parts of the country. It “easily took the lead as the illuminant” because it was “a decided improvement on other oils then in use,” (especially lard oils) according to a lamp manufacturer’s “History of Light.” By 1860, thousands of distilleries churned out at least 90 million gallons of alcohol per year for lighting. 22 In the 1850s, camphene (at $.50 per gallon) was cheaper than whale oil ($1.30 to $2.50 per gallon) and lard oil (90 cents per gallon). It was about the same price as coal oil, which was the product first marketed as “kerosene” (literally “sun fuel”)." ( Kovarik, 1998)

• Rock oil (kerosene) was only marketed as lamp oil in the 1860's 15 years after the peak in whaling in 1849. Kerosene was more of a direct competitor to Camphene than to whale oil in price and market niche. At this point there are no cost savings between camphene and kerosene as they are priced more or less the same.

• In 1862 and 1864 a $2.08 tax on alcohol was implemented raising the price substantially. This raised the costs of Camphene just as the equivalently priced kerosene enters the market. "The imposition of the internal-revenue tax on distilled spirits … increased the cost of this ‘burning fluid’ beyond the possibility of using it in competition with kerosene..,” said Rufus F. Herrick, an engineer with the Edison Electric Testing Laboratory who wrote one of the first books on the use of alcohol fuel." (Kovarik, 1998)

• "the American alcohol tax meant that kerosene became the primary fuel virtually overnight, and the distilleries making lamp fuel lost their markets. The tax “had the effect of upsetting [the distilleries] and in some cases destroying them,” said IRS commissioner David A. Wells in 1872. “The manufacture of burning fluid for lighting suddenly ceased; happily, it was replaced by petroleum, which was about to be discovered.” Similarly, C.J. Zintheo, of the US Department of Agriculture, said that 90 million gallons of alcohol per year were used for lighting, cooking, and industry before the tax was imposed. Meanwhile, use of oil shot up from almost nothing in 1860 to over 200 million gallons in 1870. “The effect was disastrous to great industries, which, if [they were to be] saved from ruin, had to be rapidly revolutionized,” according to Irish engineer Robert N. Tweedy. " (Kovarik again)

In short the idea that kerosene replaced whale oil is something of a myth. Whaling largely collapsed due to depletion and over hunting. Whale oil was a premium product that was largely replaced by camphene and then kerosene and then the electric light not by kerosene directly. Kerosene enters the market in large part due to a political decision to tax one of it's competitors principle ingredients, alcohol.

the full cite for the camphene element is Bill Kovarik, Automotive History Review, Spring 1998, No. 32, p. 7 – 27. Open access version here

The American whaling fleet began to decline before the transition to petroleum and the industry became less and less profitable throughout the second half of the 19th century.

The Civil War was a major hardship for the whaling fleet; the fleet contracted by about 50% during the war. The US Navy bought 24 whale ships (14 from New Bedford) and a merchant ship and in December 1861, sank them in Savannah harbor to blockade the city. 14 more whale ships and 6 more commercial ships were sunk at Charleston in January 1862. The Confederates also targeted whale ships in an effort to disrupt the Union economy (and because most of the important whaling centers were staunchly pro-Union). The CSS Alabama captured and burned 14 whale ships and the CSS Shenandoah destroyed 25 more.

Whale oil faced competition in lighting as early as the 1840's from lard oil, created by rending pig fat, and camphene, a mixture of turpentine and alcohol. Camphene was cheaper than whale oil and burned brightly, but it was dangerous and there were many reports of the substance causing explosions and fires. The Whalemen's Shipping List, the most popular trade journal for the industry, advocated for the government to regulate camphene in order to help whale oil. Other papers mocked these competitors as burning too fast or smelling bad. Coal gas began to be used in many cities as well, including New Bedford starting in 1853. By the end of the 1850's, kerosene also became a serious competitor to whale oil. And after the discovery of oil in 1859, kerosene really took off because the production of kerosene from oil instead of coal allowed the supply to meet demand. To put the fight the whaling industry faced into perspective, the entire whale fleet produced 430,000 barrels of oil in 1847, its most productive year. The petroleum industry refined that much oil in its first year of production in 1860. By 1862, three million barrels of petroleum oil was produced compared to 155,000 barrels of whale oil. By 1870, the Whalemen's Shipping List wrote:

Our merchants do not look upon the future of whaling with encouragement, and seem disposed to distrust it as to its pecuniary results.

In 1871, many American whalers pushed north into the Arctic in pursuit of bowhead whales. An especially bad season of weather caught the fleet by surprise leading to many boats being caught in the ice and crushed. In total, 33 whale ships were lost, including 22 from New Bedford, and more than 1,200 people had to evacuate across the ice to awaiting rescue ships. The New York Times wrote of the incident:

It is reported from that city that the disaster is really almost as severe a blow to it as was the great fire to Chicago; it has prostrated its main business—that of whaling—and has seriously damaged, if not crippled, its leading insurance offices.

12 more ships were lost in a similar disaster in 1876. By the late 1870's, the fleet had shrunk from a high of more than 700 ships to fewer than 200. Only about a dozen whaling ports were still operating. Whales became increasingly scarce from overfishing requiring longer and longer voyages. This increased costs, decreased profits, made it harder to find crews and made insuring the trips exceedingly difficult. Many of the leading whaling families were unwilling to send out ships without insurance and some began moving their capital out of whaling to industries such as textiles.

Ironically, the whaling industry was sustained into the early 20th century not so much by whale oil but by baleen. Baleen, a hard, bristle-like substance in some whales' mouths, was used in a variety of products, but especially in the hoops of women's skirts that became fashionable in the late 19th century. In 1870, baleen fetched 85 cents a pound but by 1904, it went for $5.80 a pound. Given that a large bowhead whale could have upwards of 3,000 pounds of baleen, whale bone became much more profitable than whale oil by the turn of the century. By the first decade of the 20th century however, fashion tastes began to change and whalebone prices collapsed. When the Whalemen's Shipping List published its last issue in December 1914, the whaling fleet consisted of just 32 ships. By the end of World War I, New Bedford was the only remaining whale port with just 12 ships operating.

Whaling declined gradually for a long time through a variety of outside pressures. Many of the owners and investors of the industry were content to move their investments to safer and more profitable industries. By and large, American whaling declined without a major fight.

Source: Leviathan: The History of Whaling in America by Eric Jay Dolan