Ruby search path?

When I start up the chef server I get the following error message

`require’: no such file to load – merb-assets (LoadError)”

I can change directory to the directory containing merb-assets
(/opt/chef/local/lib/ruby/site_ruby/1.8/gems/gems/merb-assets-1.1.3/lib/) and
then start the server.

There are other similar errors for other binaries

Is there some kind of search path I can set?
I already have GEM_HOME set to /opt/chef/local/lib/ruby/site_ruby/1.8/gems