In the scenario described, where a patient has low blood oxygen levels but the blood is circulating properly, the most likely structure functioning improperly is the alveoli.
The alveoli are the tiny air sacs in the lungs where gas exchange occurs; they are responsible for oxygenating the blood and removing carbon dioxide. If the alveoli are not functioning properly, it can lead to inadequate oxygen levels in the blood, even if blood circulation is normal.