In this scenario, if the patient's blood is circulating properly but they have low blood oxygen levels, the most likely structure that is functioning improperly is the alveoli.
The alveoli are the tiny air sacs in the lungs where gas exchange occurs, specifically the exchange of oxygen and carbon dioxide. If the alveoli are not working properly, they may not be able to effectively pick up oxygen from the air, leading to low blood oxygen levels despite normal circulation.