mysql2 gem in gem list but getting project can not find gem

I am currently building a RoR project that requires the mysql2 gem. I
successfully installed the gem. Because it is showing up in my gem list.

However I am getting the following error when I try to start my project:
"Could not find gem 'mysql2 (= 0.3.17) ruby' in the gems available on
this machine. Run `bundle install` to install missing gems."

The gem is also definitely in my Gemfile. I've included a log in order
to display all of this info.

What can I do for my project to recognize that mysql2 gem is most
definitely installed on my machine?

Attachments:
http://www.ruby-forum.com/attachment/10441/log.txt

Did you try to run “bundle install” or “bundle update”?

1) You probably shouldn't be doing development as root.

2) Look at the second and last lines of your snippet - see a problem?

[root@vc2cmmka035538n Ruby]# ruby -v
ruby 1.8.7 (2011-06-30 patchlevel 352) [x86_64-linux]
[root@vc2cmmka035538n Ruby]# rails -v
Rails 3.2.3
[root@vc2cmmka035538n Ruby]# gem env
RubyGems Environment:
  - RUBYGEMS VERSION: 1.8.24
  - RUBY VERSION: 1.9.3 (2013-06-27 patchlevel 448) [x86_64-linux]